First Reserve leads $1bn coal buyout

The New York and London energy specialist is leading The Blackstone Group and strategic partner American Metals & Coal in the acquisition of US coal assets from Germany’s RAG Coal International.

First Reserve Corporation, The Blackstone Group and privately held American Metals & Coal have agreed to buy RAG American Coal Holding from Germany’s RAG Coal International for approximately $1 billion (€827 million).

RAG American is the fourth largest coal producer in the US based on tonnage, according to a press release. James Roberts will continue his role as chief executive officer of the newly independent company.

In the statement, Blackstone president and CEO Stephen Schwarzman said the US coal industry has ‘strong fundamentals.’

RAG Coal has already sold assets in Australia and Colorado and is planning divestitures of assets in Venezuela.

First Reserve, based in Greenwich, Connecticut, is the largest energy-focused private equity investor. The firm recently opened an office in London.

In 2002, the firm acquired coal operations from El Paso in a $53 million deal.

Coal investments have proved lucrative for financial investors in the past. In 1998, Lehman Brothers Merchant Banking contributed $400 million in equity to the $2.4 billion buyout of Peabody Energy, a coal producer the firm took public in 2001.