May 2010

2009 Overview

Oversupply Price response Chinese & Indian demand Market shift Continued Chinese restructuring Still weak demand in Atlantic Basin

Where We Are Now

2010 Outlook

At the start of 2009, Atlantic Basin is grossly oversupplied

Macroeconomic factors Displacement in dispatch order by cheap gas

Monthly coal stocks in the US as of March 31, 2009

Source: Energy Ventures Analysis, Inc.

Atlantic and Pacific Basin prices respond

Global Price Benchmarks (Sep 08 - Jun 09)
$190 $170 $150 $130 $110 $90

$70
$50 Sep-08 Oct-08 Nov-08 Dec-08 NWE Marker Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09

FOB RBCT

FOB Newcastle

Source: McCloskeys Coal Report

Pacific Basin demand shifts in 2nd half 2009

The story is China (w/ India helping out)

Chinese Net Imports by Coal Type
140 104.3 100 60 20 (20) -25 (60) -67.9 (100) (140) 2004 2005 2006 steam 2007 met total 2008 2009 2010e -45.6 -2.1 -4.5

138.5

Source: CRU, SSY

2009: China restructures domestic mining industry

Improve productivity and safety Domestic prices soar, imports become competitive

Source: Bloomberg, chart by JP Morgan

Indian Imports by Coal Type

80 70 60 MM metric tonnes 50 40 30 20 10 0 2005 2006 2007 2008 2009 2010e

steam

met

total

Source: McCloskeys Coal Report, Barclays Capital

India added 2 gw of coal-fired capacity in 2009, after adding 5.6 gw in 2008 Part of 93 gw planned as part of 11th Five Year Plan

Demand for seaborne coal in Pacific Basin grew 14% from 2008 to 2009

Excluding China and India, demand was down 3% y-o-y

Global Price Benchmarks (Jul 09 - Dec 09)
$90 $85 $80 $75 $70 $65 $60 $55 $50 Jul-09 Aug-09 Sep-09 NWE Marker Oct-09 FOB RBCT Nov-09 FOB Newcastle Dec-09

Source: McCloskeys Coal Report

South Africa accelerates shipments to the Pacific Basin to meet China/India demand
South African Steam Exports by Basin
90 80 70 MM metric tons 60 50 40 30 20 10 0 2006 2007 Total Exports to Pacific 2008 Total Exports to Atlantic 2009 Total 2010e

Source: McCloskeys Coal Report

Chinese Imports of Russian Coal

16
14 12 MM metric tonnes 10 8 6 4

2
0 2004 2005 2006
Met

2007
Steam Total

2008

2009

2010e

Source: McCloskey's, DTE estimates

2009 Overview

Oversupply Price response Chinese & Indian demand Market shift Chinese restructuring Chinese imports Still weak demand in Atlantic Basin Cautiously optimistic

Where We Are Now

2010 Outlook

Chinese mines are in desperate need of thorough modernization

Coal Miner Productivity China Total vs US Underground

Source: Bloomberg, CEIC, BP Statistical Review, chart by JP Morgan

Chinese imports have actually accelerated

Source: Bloomberg, CEIC, BP Statistical Review, chart by JP Morgan

Tightened global market in early 2010

Result of increased Chinese and Indian coal imports If not for change in world coal flows, the market would still be in oversupply situation

China and India remain largest growth areas for demand

Governmental and monetary policies continue to support this China continues to restructure domestic coal market

West to East pull of coal likely to continue

Pacific Basin likely to outperform Atlantic Basin price

Coal likely to gain back market share in electricity generation sector North American & European demand will take time to recover from high inventory levels and recovering economies

Supply bottlenecks in key exporting countries (S. Africa, Australia) not alleviated in 2009 and will continue in 2010
Insert timeline of RBCT build out

Significant changes to the global seaborne coal market in 2009big impact of China China/India demand continue to be strong
Chinese demand will be highly sensitive to international prices in 2010 (highly price-dependent) Will depend on consolidation of Chinese coal industry

New coal flows established in 09 likely to persist Pacific Basin prices remain stronger than Atlantic Basin prices
US and European prices recover slower

Supply bottlenecks will persist