Transportation & Logistics
Several factors are influencing the cost of moving coal today. First, coal transportation is very capital intensive, requires highly specialized labor and demands consistent ratable shipping volumes to achieve economies of scale. Second, changes in technology have resulted in periods of low-priced natural gas that have decreased shipping demand for coal. As coal shipments decrease, labor and transportation assets are redeployed to other markets. Third, coal supply chains are interdependent between origins and destinations. Supply chain disruptions create adverse economic impacts for all stakeholders. Before joining FTI Consulting, our Energy professionals spent years working for coal companies, railroads and utilities. We understand the coal supply chain challenges, and there is little or no learning curve required in bringing our expertise to bear.
Our Service Offerings
Coal suppliers, transportation providers and end users are the principals most frequently requesting our dispute resolution services. Since these entities are interrelated and interdependent, contract disputes arise primarily over non-performance issues. With all parties experiencing pressure on their bottom line, each of the parties continually evaluates whether contractual commitments are being met and, if not, what course of action may be appropriate for resolution. Because our Energy professionals have spent part of their career at coal companies, railroads, utilities and regulatory agencies, FTI Consulting combines broad market knowledge, a clear understanding of the regulatory environment, and the methodological framework and analytical tools to provide powerful solutions, timely responses and expert testimony.
Client investigations may be initiated by an inquiry from regulatory agencies such as the Federal Energy Regulatory Commission and the Surface Transportation Board or by the railroads or end users. The purpose of many regulatory investigations is to corroborate issues such as transportation rate revenue adequacy, fair trade practices or transportation service adequacy or to assess breach of contract and to calculate damages. Many FTI Consulting Energy professionals have spent part of their career working for coal companies, railroads, utilities or federal regulatory agencies, where they have authored some of the regulations governing the coal industry. This professional experience provides us with a unique vantage point that provides a full understanding of how government regulations are initiated and implemented, as well as how commercial contract disputes are adjudicated.
Shifts in coal market dynamics impact the role of the regulator, exerting pressure on policymakers to re-evaluate how tax or pricing policies are affecting market participant behavior and performance. Because many FTI Consulting Energy professionals have spent part of their career working for regulatory agencies, where they have authored some of the regulations governing the coal industry, we have unique insight into the policymaking process. We can very quickly assess the economic impact that proposed regulations and legislation may have on our clients, evaluate what potential compliance difficulties may exist, and determine what modifications to the regulations and legislation are necessary to benefit our clients the most.
Navigating the public policy challenges facing coal transportation requires communications and public affairs strategies that are reasoned, focused and based on depth of experience. The professionals within the Strategic Communications segment at FTI Consulting have worked in federal and state government, for various utilities dealing with coal transportation issues and with the media reporting on the coal industry. We understand the fundamentals of the transportation industry, the players and the politics.
Most transactions in the coal industry are contractual among coal companies, utilities, transportation/logistics providers and others. Success for transportation providers in dynamic market conditions requires a comprehensive understanding of each party’s business model and the potential risk exposure created via each commercial contract. Intelligent contract design and asset management — buying, selling and sharing assets for risk diversification — can provide protection in the event of a market downturn. FTI Consulting Energy professionals draw upon their extensive industry experience to structure contracts using a methodological framework, analytical tools and reliable forecasts.
In today’s uncertain market conditions, companies involved in coal transportation/logistics must focus on asset management more acutely than at any other time in our history. The goal should be to structure and share corporate assets to spread risk to lessen the impact of market fluctuations. FTI Consulting Energy professionals have extensive financial, operations and industry experience and are well-versed in structuring deals that create a stronger competitive position for our clients.
Strategic & Business Consulting
All market participants — in coal mining and extraction, transportation/railroad and end users — face large capital investment decisions. They need to ensure that they’re operating based upon an accurate short- and long-term picture. FTI Consulting Energy professionals evaluate internal, external and government forecasts. We assess the future, including coal demand projections, by modeling future energy market clearing prices and regulatory requirements. Our economic modeling measures the impact of technological changes associated with renewable energy, as well as with historic competitive fuels. We then create models to analyze various scenarios and identify the potential outcomes, for near- to long-term time horizons. This improves the probability of success for capital expenditure decision making.