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ACI » Topics » Decreases in demand for electricity resulting from economic, weather changes or other conditions could adversely affect coal prices and materially and adversely affect our results of operations.This excerpt taken from the ACI 10-K filed Mar 1, 2010. Decreases
in demand for electricity resulting from economic, weather
changes or other conditions could adversely affect coal prices
and materially and adversely affect our results of
operations.
Our coal is primarily used as fuel for electricity generation.
Overall economic activity and the associated demands for power
by industrial users can have significant effects on overall
electricity demand. An economic slowdown can significantly slow
the growth of electrical demand and could result in contraction
of demand for coal. Declines in international prices for coal
generally will impact U.S. prices for coal. During the past
several years, international demand for coal has been driven, in
significant part, by fluctuations in demand due to economic
growth in China and India as well as other developing countries.
Significant declines in the rates of economic growth in these
regions could materially affect international demand for
U.S. coal, which may have an adverse effect on
U.S. coal prices.
Weather patterns can also greatly affect electricity demand.
Extreme temperatures, both hot and cold, cause increased power
usage and, therefore, increased generating requirements from all
sources. Mild temperatures, on the other hand, result in lower
electrical demand, which allows generators to choose the sources
of power generation when deciding which generation sources to
dispatch. Any downward pressure on coal prices, due to decreases
in overall demand or otherwise, including changes in weather
patterns, would materially and adversely affect our results of
operations.
The
use of alternative energy sources for power generation could
reduce coal consumption by U.S. electric power generators, which
could result in lower prices for our coal. Declines in the
prices at which we sell our coal could reduce our revenues and
materially and adversely affect our business and results of
operations.
In 2009, approximately 94% of the tons we sold were to domestic
electric power generators. Domestic electric power generation
accounted for approximately 92.7% of all U.S. coal
consumption in 2007, according to the EIA. The amount of coal
consumed for U.S. electric power generation is affected by,
among other things:
Gas-fueled generation has the potential to displace coal-fueled
generation, particularly from older, less efficient coal-powered
generators. We expect that many of the new power plants needed
to meet increasing demand for electricity generation will be
fueled by natural gas because gas-fired plants are cheaper to
construct and permits to construct these plants are easier to
obtain as natural gas is seen as having a lower environmental
impact than coal-fueled generators. In addition, state and
federal mandates for increased use of electricity from renewable
energy sources could have an impact on the market for our coal.
Several states have enacted legislative mandates requiring
electricity suppliers to use renewable energy sources to
generate a certain percentage of power. There have been numerous
proposals to establish a similar uniform, national standard
although none of
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these proposals have been enacted to date. Possible advances in
technologies and incentives, such as tax credits, to enhance the
economics of renewable energy sources could make these sources
more competitive with coal. Any reduction in the amount of coal
consumed by domestic electric power generators could reduce the
price of coal that we mine and sell, thereby reducing our
revenues and materially and adversely affecting our business and
results of operations.
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