Coal news and updates

CNX Coal to start trading today

Consol Energy Inc. has announced that it will begin trading units of its thermal coal spinoff, CNX Coal, July 1.

The Cecil-based company announced the move Tuesday afternoon, just hours after it had decreased the number of units being offered from 8 million to 5 million. They are priced at $15 apiece.

Since it filed a registration statement with the Securities and Exchange Commission in April, CNX Coal, which would own 20 percent of Cecil-based Consol's three southwestern Pennsylvania coal mines, has twice dropped the number of public units it planned to sell and once slashed their price.

“It almost smells of desperation when you try to force something like that and the market keeps [reacting badly],” said Chris Wiles, president of Rockhaven Capital Management in Mt. Lebanon.

If a company has lowered its unit price or decreased the offering — and has done that multiple times at that — “what they're telling you is this company's not worth what they thought it was worth,” said Jay Sukits, a former investment banker and a clinical assistant professor of business administration at the University of Pittsburgh's Katz Graduate School of Business.

Even Monday's Supreme Court ruling on mercury and air toxics standards, which was hailed as a boon to the coal industry and to utilities that want to continue to burn the fuel, didn't do enough to lift investors' interest.

What makes the situation even more interesting, though, is that billionaire hedge fund manager David Einhorn obviously saw promise in the company. His New York firm Greenlight Capital had committed to buying 5 million units of CNX Coal in a private deal concurrent with the public offering.

In the past week, that commitment has increased from 2 million units. Mr. Einhorn already owns about 9 percent of Consol Energy Inc.

“That guy is obviously privy to what's going on inside the company,” Mr. Wiles said.

CNX Coal made several other revisions to its registration statement Tuesday, mostly to add more pessimistic projections for coal's outlook than previously disclosed.

On June 3, environmental activist group Greenpeace sent a letter to the SEC challenging some of CNX Coal’s data about the future market for coal, specifically charging that it used outdated information from the U.S. Energy Information Administration and Woods Mackenzie to paint a rosier picture than warranted.

Although CNX Coal never responded to the letter publicly, Tuesday's filing appeared to address some of the concerns. The company added a section on the current weakness in the export market and elaborated on how China, once seen as insatiable, has tempered its demand for coal.

Other tweaks hedged the partnership's predictions that coal would remain desirable.

In places, “stable demand” was changed to “relatively stable demand” and updated projections from Wood Mackenzie, a research and consulting firm, revealed that Northern Appalachian coal — the kind produced at Consol's mines — is headed for a “gradual decline.”

source: http://powersource.post-gazette.com