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Consol, AEG forge deal

Tuesday, July 10, 2001

By Frank Reeves, Post-Gazette Staff Writer

Pittsburgh-based Consol Energy Inc. and American Electric Power Inc. have entered into a long-term agreement under which the electricity supplier will purchase 34 million tons of coal from Consol through 2008.

As part of the agreement, Consol acquired three coal-mining companies in Ohio and West Virginia that had been owned by Columbus, Ohio-based American Electric Power. Consol purchased the stock of Windsor Coal Co. in West Liberty, W.Va., Central Ohio Coal Co. in Cumberland, Ohio, and Southern Coal Co. in Wilkesville, Ohio.

"These agreements significantly expand our relationship with one of the nation's largest power generators and coal buyers," said James Brett Harvey, Consol's president and chief executive officer.

AEP, which owns and operates more than 38,000 megawatts of electricity capacity, is the nation's largest generator of electricity. Consol is one of the nation's largest producers of bituminous coal and the largest exporter of U.S. coal.

Initially, at least, much of the coal will come from the four mines operated by the three coal companies Consol acquired. But eventually, the supply will have to come from other Consol operations, as the mines currently owned by Windsor, Central Ohio and Southern Ohio companies are expected to be phased out soon because they are no longer profitable to operate.

The coal recovered from these mines, as well as other mines in the Ohio River valley, is relatively high in sulfur. As a result the market for the coal is limited to power plants equipped with sophisticated air emission control devices.

Thomas Hoffman, Consol's vice president for investor relations, said one advantage of the deal was that it would give Consol a ready market for this high-sulfur coal, since AEP plans to use the coal at some of its coal-fired power plants that are equipped with the latest air emission control devices.

In April, AEP announced that it had entered into an agreement to sell the mining companies. Since then, AEP has laid off 120 of the 630 workers employed at the two mines operated by Southern Ohio Coal Co. in Meigs County, Ohio, according to federal officials.

Hoffman said Consol had laid off about 200 of the 400 hourly wage workers at the Meigs County operations. Hoffman noted that Consol was doing nothing that AEP wouldn't have done had it retained ownership of Southern Ohio Coal Co.

One reason for the layoffs, Hoffman said, is that many of the workers are no longer needed, because Consol anticipates shutting down the mines sometime after the end of this year.

Hoffman said some of those who were laid off had opted for early retirement and were receiving benefits under an industrywide agreement between coal mining operators and the United Mine Works of America.

Hoffman said he expected that many of those who had been retained by Consol would be absorbed into the company's other operations, once the mines in Meigs County are shut down.

The prospect of mass layoffs has prompted concern among some Ohio lawmakers. Last week, U.S. Sen. Mike DeWine, a Republican, and U.S. Rep. Ted Strickland, a Democrat whose district includes Meigs County, announced that the U.S. Labor Department had approved a $5 million grant to provide education, training and income assistance to workers who may lose their jobs at Southern Ohio Coal Co.



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