SEC 8-K — ARCH COAL INC (ARCH) (0000950137-08-007402) · filed 2008-05-14

EX-99.1 2 c26759exv99w1.htm SLIDES FROM THE PRESENTATION exv99w1 Exhibit 99.1 Merrill Lynch Global Metals, Mining & Steel Conference Steve Leer, Chairman and CEO Arch Coal, Inc. Key Biscayne, FL May 14, 2008 Forward-Looking Information This presentation contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties arise from changes in the demand for our coal by the domestic electric generation industry; from legislation and regulations relating to the Clean Air Act and other environmental initiatives; from operational, geological, permit, labor and weather-related factors; from fluctuations in the amount of cash we generate from operations; from future integration of acquired businesses; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. For a description of some of the risks and uncertainties that may affect our future results, you should see the risk factors described from time to time in the reports we file with the Securities and Exchange Commission. LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Developing nations will increase energy use, putting pressure on global supply Source: United Nations’ Human Development Report 2007, 2006 World Development Indicators (World Bank) LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Coal’s advantage: abundant, secure and widely dispersed Based on current production levels and proven reserves, coal should outlast both gas supplies and oil reserves by roughly 4 times Source: ACI, Bank of America, BP Statistical Review 2007 and Blackwell Energy Research LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Largest U.S. coal plant build-out since 1980 is ongoing, but not enough to satisfy America’s energy needs · Build-out of 16 GW equates to 54 million tons of new annual coal demand over next five years – Arch’s reserve base positioned to service two-thirds of these plants · Roughly 9 GW – another 33 million tons – in advanced permitting stages · Other fuels used for electric generation are challenged to grow or represent niche players · Reality is that we need all fuels –along with conservation and efficiency – to meet our growing energy needs Source: Platts and ACI LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Reserve margins for the U.S. power grid will fall below target levels without adequate investment Year when reserve margin is expected to fall below target level, by region America has long had one of the world’s most reliable power systems . Without investment, that could soon change. Source: NERC 2007 Long-Term Reliability Assessment LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Coal is – and will remain – a vital part of America’s energy future Source: EIA, Platts, Argus Coal Daily and NYMEX LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Over the long term, clean-coal technologies can broaden market demand for coal A plug-in hybrid is one            Coal can be converted            Gasification can reduce entry for coal into the            into transportation fuel            emissions and transform transportation market            coal into pipeline-quality • At current oil prices, natural gas • Likely to create            coal-to-liquids significant off-peak            facilities are • IGCC and CCS should demand for electricity            economically feasible            enable coal to prosper in a carbon- constrained world Public policy initiatives aimed at domestic energy security are spurring debate on energy legislation and incentives for clean-coal technology development Source: ACI LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Since 1970, coal has been used in increasingly clean ways in the United States · More progress is expected under existing regulations · Higher efficiency rates and carbon capture technologies create opportunities for reducing carbon intensity as well Source: NMA, EPA NOx (Nitrogen Oxide), SO2 (Sulfur Dioxide), PM10 (Particulate Matter) LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Developed nations must adopt climate solutions and export them to developing nations China surpassed the U.S. in GHG emissions in 2007 The growth rate of GHG emissions in developing nations is likely to significantly exceed that of developed nations Developed nations must invest in more clean coal technology research & development Source: IEA World Energy Outlook 2006, Guardian LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Explosive growth in international coal markets underscores the shortage of energy around the globe Americas            Europe/Africa            Asia/Pacific Americas expected to            Europe/Africa should            Asia’s net exports almost double net            increase its net            projected to decline coal exports in 2008 imports in 2008 significantly in 2008 – Driven by increase in – Significant export – Driven by strong exports from USA            declines from            economic growth in South Africa            developing nations Americas imports expected to decline – Large switch from – Severe supply from 2007 levels            domestic to imported            constraints in coal in Europe            traditional coal – Driven by lower            export nations – Coal production import levels into USA declines in Europe Global coal supply and demand flows suggest that the world is short of coal by 25 million to 35 million metric tons in 2008, with continued significant supply deficits in 2009 and beyond Source: ACI LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL In the United States, Arch expects growth in coal demand to accelerate over the next three years (in million tons) 2008 2009 2010 Growth at Existing Coal Plants +11 +11 +11 New Coal Plant Demand 1/ 4 22 19 Increase in Gross Exports 20 10 10 Decline in Imports 8 1 - Incremental Demand Growth +43 +44 +40 Cumulative +87 +127 1/ Net of coal plant retirements. U.S. coal demand to grow by more than 3% annually through 2010 – U.S. coal generation fleet has increased average utilization by 1 percent annually over the past 10 years – New coal plant build-out will expand coal consumption meaningfully – U.S. is expected to become a more significant net exporter given shortage of coal supply worldwide and available port capacity Source: ACI and Platts LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL While U.S. generator stockpile levels are comfortable, inventories are declining in the East • Eastern stockpile levels • Western stockpile levels • Total generator stockpile have declined 7.6 million            have increased 5.2 levels have declined 2.4 tons year-to-date            million tons year-to-date            million tons year-to-date • In Central Appalachia, • Expect levels to decline • Typically, stockpiles stocks could fall to near- as demand in the East for            build from January critical levels by autumn            replacement tons grows            through March Source: ACI and Energy Ventures Analysis, Inc. LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL PRB coal has gained market share in border states just east of the Mississippi River Border States East of MS            Border States East of MS            Border States East of MS Burn by Coal Type circa 1990 Burn by Coal Type circa 1995 Burn by Coal Type circa 2007 • Eastern border state • By 1995, power plants • Current 69 percent power plants in Wisconsin, in these four states            mix of PRB coal has Illinois, Tennessee and            increased their mix of            been achieved with Mississippi historically PRB coal from 22 relatively modest burned a small mix of            percent to 42 percent capital investment PRB coal            in just five years Source: ACI and Energy Velocity *Border states represent WS, IL, TN and MS LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL We foresee increased PRB market expansion opportunities further east of the Mississippi River · Eastern power plants in non-border states are generally comparable to plants in the border states of WS, IL, TN and MS · These non-border state plants could theoretically increase their mix of PRB coal as plants in the border states have done · If plants in non-border states were to switch to PRB coal, the equivalent PRB volume opportunity would represent a potential of 300 million tons Source: ACI and Energy Velocity LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Arch Coal is positioned for the future · One of the largest coal producers in the U.S. · Core business is providing U.S. power generators with cleaner-burning, low-sulfur coal for electric generation – Supplies roughly 12% of U.S. coal needs – Provides source fuel for roughly 6% of U.S. electricity · Talented workforce operates large, modern mines · Industry leader in mine safety, productivity and reclamation Source: ACI LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Arch’s national scope of operations and reserve base includes presence in four major U.S. coal basins Powder River Basin 1. Coal Creek 2. Black Thunder Western Bituminous 1. Skyline 2. Dugout 3. Sufco 4. West Elk Illinois Basin Knight Hawk Central Appalachia 1. Mountain Laurel 2. Coal-Mac 3. Cumberland River 4. Lone Mountain Source: ACI at 12/31/07 LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Arch is continuing to enhance reputation as a responsible energy company · Operating the world’s safest coal mines – Awarded MSHA’s Sentinels of Safety honor for operating the nation’s safest underground coal mines in 2006 and 2007 – Ranked first among coal industry peers for safety performance last year · Acting as responsible citizens and good environmental stewards – Inaugural 2007 social responsibility report elevates awareness of Arch’s environmental programs – Earned 3 National Good Neighbor Awards in 4 years · Achieving superior financial performance – Forbes recognized Arch as one of the 100 most trustworthy U.S. companies of 2008 – Expect 2008 to be a record earnings year for Arch Source: ACI, Forbes LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Arch has one of the industry’s strongest and cleanest balance sheets Source: SEC filings compiled by ACI LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Arch’s mines are strategically positioned to respond to dynamic trends in coal markets Central Appalachia            Western Bituminous            Powder River Basin · Customers span five · Export growth and · Supply constraints in continents            supply pressures in            other regions and eastern U.S. are            sufficient PRB rail · Expect to ship 4.5 boosting demand            capacity should pull million tons into global coal east and domestic met · Arch benefits as markets in 2008; largest producer · Arch will benefit from 5-6 million in 2009 rising domestic prices · Have signed · Pursuing incremental            significant export · In discussions to margin opportunities            business            export PRB coal Source: ACI LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Arch is advancing clean-coal technology development via a proposed coal-to-liquids plant in Wyoming · World oil consumption needs are growing, and increasingly will be supplied by OPEC · CTL can have a positive impact on the U.S. economy, security and environment · Arch owns an equity interest in DKRW Advanced Fuels · Proposed plant would capture CO2 to enhance recovery in domestic oil fields Source: EIA and ACI LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Arch’s selective approach to signing new contracts retains future upside potential Source: ACI, Argus Coal Daily 5/9/08 LONG-TERM MACRO FUNDAMENTALS            CLIMATE CONCERNS AND CLEAN-COAL TECHNOLOGIES            CURRENT TRENDS            ABOUT ARCH COAL Arch continuously evaluates all avenues for value creation Shareholder Returns Organic Growth Invest in core businesses to enhance profit growth and return on capital, evaluate opportunities to further upgrade and expand reserve base Market Expansion Consider investments to expand market for coal (and improve coal’s value proposition) through Btu-conversion and other advanced coal technologies Strategic Growth Consider acquisitions or other investments that strategically fit and create value Capital Structure Enhancement Maintain strong balance sheet, and consider other vehicles for value creation, such as share repurchases or dividend increases, when advantageous Source: ACI Merrill Lynch Global Metals, Mining & Steel Conference Steve Leer, Chairman and CEO Arch Coal, Inc. Key Biscayne, FL May 14, 2008

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