February 26, 2007 / 6:35 PM / 12 years ago

U.S. coal mining stocks fall, TXU's buyout eyed

NEW YORK, Feb 26 (Reuters) - Shares in some coal mining companies fell on Monday and analysts said it might be due to Texas utility TXU Corp.’s TXU.N pledge to cut the number of coal-fired power plants it plans as part of its leveraged buyout.

The initial reaction was that the TXU deal might be perceived as negative to coal companies, they said.

TXU said it has agreed to be acquired by a group led by private equity firms Kohlberg Kravis Roberts & Co. and Texas Pacific Group for $31.8 billion.

As part of a deal to go private, TXU said it would cut the number of coal-fueled plants it plans to build in Texas to 3 from 11.

Analysts said the TXU impact would most likely be felt by producers of cheaper, Western coal from the Powder River Basin of Montana and Wyoming.

In addition, growing environmental opposition might prompt other utilities to switch to other fuels, such as natural gas, for their power generation. They noted that Consol Energy (CNX.N), which has coal and natural gas operations, was less affected by the stock slide.

There was also a feeling that comments by former Federal Reserve Chairman Alan Greenspan that it was “possible” the U.S. economy might fall into recession by the end of the year, might have also dragged down the coal stocks.

In early afternoon trading on the New York Stock Exchange, Peabody Energy (BTU.N) was down $1.69, or 3.8 percent, at $42.75, Arch Coal ACI.N fell 3.45 percent to $32.42 and Massey Energy MEE.N was down 2.66 percent at $25.24. Consol slipped 1.11 percent to $37.25.

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