Arch's $3B Investment in ADA-ES - Analyst Blog

Arch Coal Inc. (ACI) has announced plans to invest $3 billion in ADA-ES Inc. (ADES) to fund near-term growth opportunities. As the first step, Arch purchased 143,885 shares of ADA for $1.0 million.

 

The remaining $2.0 million of Arch’s investment is a consideration for an exclusive license to use ADA’s technology to reduce emissions for Arch-mined coal to produce electricity. The license is currently being negotiated to define the royalty structure and is expected to be finalized next month.

 

Arch has been a significant shareholder in ADA since it invested $1.3 million in the Littleton, Colorado-based company in 2003, when it was spun off as a separate public entity from Earth Sciences Inc.

 

ADA has been successful at developing technologies that improve the performance of coal from Wyoming’s Powder River Basin. For the past several years, ADA has worked with Arch to explore certain unique characteristics of some of their coals such as lower mercury emission while burning.

 

Arch’s additional investment in ADA, who is a leader in developing clean coal technology, is part of its commitment to clean energy. Arch’s management believes helping finance advanced technologies developed by ADA will enhance the environmental performance of Arch’s coals.

 

St. Louis, Missouri-based Arch Coal Inc. is one of the largest coal producers in the U.S., operating 20 mines across the major low-sulfur coal basins of the country. Arch Coal primarily conducts its business through three operating segments: Powder River Basin (PRB), Western Bituminous (WBIT) and Central Appalachian (CAPP).

 

Coal mined from the PRB region has very low sulfur content and low heat value. Arch’s PRB assets reflect visible long-term value. Its well-capitalized, low-cost operations provide a competitive edge over smaller players in the industry. Arch Coal is well positioned to capitalize on the resurgence in coal demand once the global economy stabilizes.