Coal, Emissions

Industrial alliance formed to support near zero-emission power and hydrogen production facility


ATLANTA, April 22, 2003 — Southern Co. and eight of the nation’s largest electric utilities and coal companies have announced the formation of an alliance to support President Bush’s FutureGen Initiative, which seeks the creation of a near zero-emission power plant and hydrogen production facility with integrated carbon dioxide management.

The facility will be a test bed for advanced coal-based power generation technologies capable of producing electricity and hydrogen with near zero emissions. Provided that the results of an initial feasibility analysis are positive, the alliance members hope to forge a partnership with the U.S. Department of Energy to help facilitate design, construction, and operation of the facility.

The industry effort is in response to a February announcement by President Bush in which he shared his vision for a near zero-emission coal-fueled power plant. Dubbed “FutureGen”, power plants of this design would produce electricity for consumers and businesses, as well as hydrogen to power a fuel cell based transportation system. To support implementation of his bold vision, the President committed the federal government to a 10-year public- private partnership.

The working group companies in the alliance include:

* American Electric Power
* CONSOL Energy Inc.
* Kennecott Energy, a member of the Rio Tinto group
* The North American Coal Corporation
* PacifiCorp, a subsidiary of ScottishPower
* Peabody Energy
* RAG American Coal Holding, Inc.
* Southern Company
* TXU

Formation of the alliance is being coordinated by Battelle, a non-profit R&D institution.

The alliance members noted that the FutureGen initiative “squarely targets three of the most critical long-term energy challenges facing the nation: 1) ensuring the continued availability of low-cost electricity; 2) reducing the U.S. dependence on imported oil and limited U.S. natural gas reserves by advancing the production of hydrogen through the use of coal, and 3) managing the potential environmental and financial risks of climate change.”

The working group companies:

* provide energy to more than 15 million American homes, businesses, and industrial customers
* mine and market all major coal types consumed in the U.S.
* have major operations in 30 States, reaching as far west as California, Oregon, and Washington, as far south as Texas, Louisiana, Alabama, and Florida, as far north as North Dakota, Montana, and Michigan; and as far east as Virginia and Georgia
* have an international presence that spans the globe, including the U.K., continental Europe, Canada, Mexico, Australia and Asia, among other regions.

At present, fossil fuels meet the vast majority of America’s and the world’s energy needs. In an age when energy must become increasingly compatible with environmental concerns, the alliance is seeking to take a bold step forward by developing designs for near zero-emission coal-fueled power plants with the hope that these plants will make sense for the U.S. economy, the environment and shareholders.

The U.S. has more than a 300-year supply of coal; therefore, the effort to design near zero-emission power plants promises to create a new way in which coal can power our economy with minimal environmental impacts. The alliance members look forward to substantive discussions with the U.S. Department of Energy’s Office of Fossil Energy and National Energy Technology Laboratory to work toward a public-private partnership.

ABOUT THE PARTICIPANTS:

American Electric Power (NYSE: AEP – News) owns and operates more than 42,000 megawatts of generating capacity in the United States and select international markets and is the largest electricity generator in the U.S. AEP is also one of the largest electric utilities in the United States, with almost 5 million customers linked to AEP’s 11-state electricity transmission and distribution grid. The company is based in Columbus, Ohio. (http://www.aep.com )

Battelle is one of the world’s largest non-profit, private R&D institutions. It develops new technologies, commercializes products, and provides solutions for industry and government ranging from pharmaceuticals and medical product development, to innovations for the energy, automotive, chemical and agrochemical industries. Headquartered in Columbus, Ohio, Battelle has annual revenues of $1 billion and more than 60 locations throughout the world. (http://www.battelle.org )

CONSOL Energy Inc. (NYSE: CNX – News) is the largest producer of high-BTU bituminous coal in the United States, and the largest exporter of U.S. coal. CONSOL Energy has twenty bituminous coal mining complexes in seven states and Australia. In addition, the company is one of the largest U.S. producers of coalbed methane, with daily gas production of approximately 135 million cubic feet. The company also produces electricity from coalbed methane at a joint- venture generating facility in Virginia. CONSOL Energy has annual revenues of $2.2 billion. It received a U.S. Environmental Protection Agency 2002 Climate Protection Award, and received the U.S. Department of the Interior’s Office of Surface Mining 2002 National Award for Excellence in Surface Mining for the company’s innovative reclamation practices in southern Illinois. (http://www.consolenergy.com )

The North American Coal Corporation, a subsidiary of NACCO Industries, Inc. (NYSE: NC – News), is engaged in the acquisition, mining, and marketing of coal used by electric utilities for power generation. Corporate headquarters are located in Dallas, Texas, with surface mining operations in Texas, North Dakota, Louisiana, and Mississippi. North American Coal also provides dragline mining services for a limerock quarry in Florida. (http://www.nacoal.com )

PacifiCorp (NYSE: SPI – News) provides reliable, efficient electrical service to more than 1.5 million customers. PacifiCorp operates as Pacific Power in Oregon, Wyoming, Washington and California; and as Utah Power in Utah and Idaho. As one of the lowest-cost electricity producers in the United States, PacifiCorp generates about 8,000 megawatts of energy from coal, hydro, gas- fired combustion turbines, geothermal and renewable wind power. The company’s new plan seeks to add 1,400 MW of renewable resources, including new wind, into its generation portfolio during the next 10 years. PacifiCorp’s green pricing program is ranked third in the nation for customer participation by the U.S. Department of Energy. (http://www.pacificorp.com and http://www.scottishpower.com )

Peabody Energy (NYSE: BTU – News) is the world’s largest private-sector coal company, with 2002 sales of 198 million tons of coal and $2.7 billion in revenues. Its coal products fuel more than 9 percent of all U.S. electricity generation and more than 2 percent of worldwide electricity generation. (http://www.peabodyenergy.com )

RAG American Coal Holding, Inc. is one of the 5 largest U.S. coal producers with 13 surface and underground mines located in six Eastern, Midwestern, and Western States. Its headquarters are located near Baltimore, MD. The company employs about 3,000 people and produces approximately 70 million tons of coal annually, largely for electric utilities. RAG American Coal Holding, Inc. is the U.S. mining unit of RAG Coal International AG based in Essen, Germany.

Rio Tinto (NYSE: RTP – News) Rio Tinto is a global mining company with interests in energy products (coal and uranium), copper, aluminium, iron ore, industrial minerals, diamonds and gold. The majority of Rio Tinto’s operations are in North America and Australia. (http://www.riotinto.com )

Kennecott Energy operates open cut thermal coal mines in the Powder River Basin, USA. It is one of the largest US producers of low sulphur coal, selling to electricity generators in the mid-western and south-eastern states. (http://www.kenergy.com )

Southern Company (NYSE: SO – News), with 4 million customers and nearly 37,000 megawatts of generating capacity, is a super-regional energy company in the Southeast and a U.S. producer of electricity. Southern Company owns electric utilities in four states, a growing competitive generation company, an energy services business and a competitive retail natural gas business, as well as fiber optics and wireless communications. Southern Company brands are known for excellent customer service, high reliability and retail electric prices that are 15 percent below the national average.

In Wilsonville, Alabama, Southern Company hosts the Power Systems Development Facility (PSDF), which is a national facility for testing innovative power generation and pollution control systems. Operation of PSDF is co-sponsored by the U.S. Department of Energy Office of Fossil Energy / National Energy Technology Laboratory, Southern Company; EPRI; Kellogg, Brown and Root; Peabody Energy; The Burlington Northern and Santa Fe Railway Company; and Siemens Westinghouse Power Corporation. (http://www.southerncompany.com )

TXU is a major energy company with operations in North America and Australia. TXU manages a diverse energy portfolio with a strategic mix of over $30 billion of assets. TXU’s distinctive business model for competitive markets integrates generation, portfolio management, and retail into one single business. The regulated electric and natural gas distribution and transmission businesses complement the competitive operations, using asset management skills developed over more than a hundred years, to provide reliable energy delivery to consumers and stable earnings and cash flow for stakeholders. In its primary market of Texas, TXU’s portfolio includes 19,000 megawatts of generation with a fuel mix of coal/lignite, natural gas/oil, and nuclear power. TXU serves five million customers in North America and Australia, including 2.7 million competitive electric customers in Texas where it is an energy retailer. (http://www.txucorp.com )