CONSOL Energy Inc. made an initial investment in the coal-to-products space by acquiring a 25 percent equity interest in CFOAM Corp. for $3.5 million. A newly-formed U.S.-based holding company whose wholly-owned subsidiary, CFOAM LLC has manufacturing facilities in Triadelphia, West Virginia.
As CONSOL’s first major step in the coal-to-products area, which have lower emissions and greater value potential, CONSOL hopes the transaction will provide a high-margin revenue stream and intriguing new opportunities in coal.
CFOAM Limited, an ASX-listed company, owns the remaining 75 percent of CFOAM. CFOAM manufactures carbon foam products from coal and focuses on the industrial, aerospace, military and commercial product markets.
In addition, CONSOL provided a $1.1 million term loan to CFOAM LLC for working capital and invested another $0.4 million to acquire a first lien note of CFOAM LLC from one of CFOAM LLC’s first lien noteholders.
CFOAM Corp. has a four-member board, with two members appointed by CONSOL, and the coal company will advise CFOAM on strategic, management and operational advice. CFOAM has also provided CONSEOL with certain rights, including the first right to provide any future debt financing and the right to match certain offers for the sale of equity or assets of CFOAM Corp. and CFOAM LLC.
CONSOL President and CEO Jimmy Brock said, in a statement, “Consistent with our capital allocation process, the CFOAM investment is part of CONSOL’s measured investment bucket earmarked for innovative and alternative uses of coal as a pathway for diversification. Today, CFOAM products are used or being developed for a wide range of markets including composite tooling for the aerospace sector, as well as energy absorbing, structural and defense applications. We estimate that the total addressable market for such products is over $15 billion annually.”
CONSOL is a Canonsburg-based producer and exporter of coal that owns and operates mining operations in the Northern Appalachian Basin.