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Consol Energy’s Coal MLP Plans to Go Public on June 25

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Consol Energy

Headquartered near Pittsburgh, Pennsylvania, Consol Energy (CNX) is an energy company with interests in coal and natural gas. The company entered the natural gas business in the 1980s to make coal mining safer by capturing methane trapped underground. However, its natural gas segment has been its growth driver over past decade. The company mines coal in Appalachia in two segments:

  1. Pennsylvania Operations
  2. Virginia Operations

The company’s Pennsylvania operations run three mines. They sold 26.1 million tons of high-grade northern Appalachian coal in fiscal 2014, a 23.1% increase in shipments over fiscal 2013. The segment generated $1.62 billion in revenue in fiscal 2014.

The company’s Virginia operations sold 4.1 million tons in fiscal 2014, clocking $297 million in revenues. Alpha Natural Resources (ANR), Arch Coal (ACI), and Walter Energy (WLT) also mine coal (KOL) in Appalachia.

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CNX Coal Resources LP

Consol Energy (CNX) formed CNX Coal Resources LP (CNXC) to spin off its Pennsylvania operations as an MLP. As per the agreement, CNX will transfer a 20% ownership interest and complete operational control to CNXC. The operations have total recoverable reserves of over 785 million tons.

The coal in the Pennsylvania operations have heat content of around 13,000 British thermal units per pound. This coal is sold on multi-year contracts to power plants that are compliant with Environmental Protection Agency regulations. Alliance Resource Partners (ARLP) and Natural Resource Partners (NRP) also operate as coal MLPs.

IPO Terms

CNXC priced its IPO at $19–$21 per share and plans to issue 10 million shares in an IPO on June 25. The company expects to raise $200 million through the IPO. The proceeds from the IPO should go to paying Consol Energy for the ownership stake and operational control.

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