UPDATE 1-Alpha Natural defends Foundation deal

* Says Duquesne too optimistic on metallurgical demand

* Business plan must include base load steam contracts

NEW YORK, July 22 (Reuters) - Coal company Alpha Natural Resources (ANR.N) defended its proposed acquisition of Foundation Coal Holdings FCL.N, which has come under fire from Alpha's largest shareholder.

Alpha released a presentation it is making to shareholders on Wednesday, in which it responds to several criticisms from the shareholder, Duquesne Capital Management.

Duquesne said earlier this week that it will vote against Alpha's proposed $1.5 billion acquisition of Foundation Coal Holdings, claiming that a merged company would have more exposure to less lucrative domestic markets, rather than more profitable metallurgical coal and international thermal coal markets.

Alpha argues in the presentation that Duquesne is being overly optimistic about future demand for metallurgical coal, which is used in steelmaking.

"As Alpha demonstrated in 2008, a producer must be flexible to react to met coal price swings but have a fundamental business plan that includes base load steam contracts to have a floor supporting the required capital and overhead required in the industry," the company said.

Duquesne, which is run by financier Stanley Druckenmiller, owns 5.9 million Alpha shares, or around 8.3 percent of the miner's outstanding common stock. The merger transaction is scheduled to be voted on by Alpha shareholders on July 31. (Reporting by Michael Erman; Editing by Tim Dobbyn)