Tuesday, July 26, 2005

Nat King Coal.

I happened to catch Kudlow & Company on CNBC today, which I generally don't watch. Perhaps it was serendipity, because two of the guests were hot on coal. Yes, coal. (They were also into energy in general, but they specifically picked out coal to highlight.)

The guests were Frank Husic of Husic Capital Management (I think - the web guest list doesn't mention him) and Susan Byrne of Westwood Holdings Group. Mr. Husic referred to it as a "secular move" (ie. long term).

Now I don't know where you are, but where I'm at it's hot and much of the US is hot. And hot means air conditioning, and air conditioning means electrical power, and much of our electrical power means coal. Additionally, some coal is used in producing metals, so in theory it is a China and India play. (I know next to nothing about this.)

Among names mentioned: Peabody, Massey, Arch, Consol, Foundation, Alpha Natural Resources, and Walter Industries, which the guest claimed had a hidden coal play.

FYI: I have some coal holdings myself, Peabody (BTU), Consol (CNX), Fording (FDG), and Natural Resources (NRP).

Article: Green Coal

Finally, coal need not be the backward polluting step many environmentalists might believe. Coal gasification facilities reduce dramatically particulate and sulfur dioxide and nitrogen oxide emissions. They can produce hydrogen, which would fit with zero-carbon hydrogen fuel cell technology.

And, as the Energy Department notes, "if oxygen is used in a coal gasifier instead of air, carbon dioxide is emitted as a concentrated gas stream. In this form it can be captured more easily and at lower cost for sequestration."

Finally, coal gasification technology is ready and available. Cleco Corp., which has generated 70% of its electricity with natural gas, on July 12 announced its plans to build a $1 billion, 600-megawatt "clean coal" power-generating plant in northern Louisiana. The company noted that natural gas prices had risen from $2 per million British thermal units of energy production to $7 per million Btu. It figures that the clean coal plant will save its customers $4 billion over 30 years over high priced natural gas.