Evergreen Energy Inc EEE

ACI & EEE PARTNERS:

[no1coalking]

ACI HITS NEW HIGH & MASSEY UP 75%: PRB UP! PRB sources say price bubble possible Washington (Platts)--7Feb2008 While western coal producers are touting the recent run-up in Powder River Basin coal prices, some sources are skeptical that the higher prices will last. They are pointing out the lack of strong fundamentals underpinning the recent surge, such as high utility demand. "There is definitely a bubble building," one market veteran from a western coal producer said Wednesday. "Powder River Basin typically has some in-place excess capacity" that could allow the producers to meet a surge in demand. While surging eastern coal exports have ignited the recent skyrocketing US coal prices, the source said one of the biggest questions facing the PRB is transportation capacity, and whether the railroads can maintain performance during 2008. So far this year, railroads have faced no major issues, although Union Pacific dealt with three coal train derailments in Wyoming and Iowa in January (PCT 2/1). The producer source added, however, that PRB coal producers may also see a direct benefit from higher Central Appalachian exports this year. "I think interior US coal buyers will be surprised to find that PRB is filling voids left by CAPP coal going to export," he said, adding that his company does not have much coal available for sale for 2008. In recent weeks, the news of surging US exports has sent eastern coal prices soaring in the over-the-counter market. PRB coal has been going up, too, on the expectation that more western coal will move east to fill in gaps. PRB 8,800-Btu/lb prices are now higher than $14/short ton for 2008 delivery, while prices for 2009 delivery reached $15/st. Last year, Arch Coal and Peabody Energy sought to restrain output from the PRB to bring the market in balance. This year, however, may be different, with producers indicating in recent fourth-quarter conference calls that they may be hiking production. Peabody, for instance, said that it will probably increase western production 7% in 2008, although some of the production increase will come from higher New Mexico and Colorado output.