AEP will enter into coal supply agreements with CONSOL to purchase about 34 million tons of coal through 2008 to be supplied by the former AEP-affiliated mines and by other CONSOL mines. The coal would be utilised at various AEP coal-fired power plants, including the Muskingum River, Cardinal and Gen James M Gavin plants.

"These agreements significantly expand our relationship with one of the nation's largest power generators and coal buyers," said J Brett Harvey, president and chief executive officer. "We are particularly pleased because we do not currently serve Gavin, Cardinal or Muskingum River. Gavin is one of the most technically sophisticated plants, in terms of emission control technology, in the United States."

CONSOL Energy will purchase the stock of Windsor Coal Company, Southern Ohio Coal Company and Central Ohio Coal Company for a nominal amount and acquire most of the liabilities of the companies.

The three companies operated a total of four mines. Meigs 31 and Meigs 2 mines, near Wilkesville, Ohio, currently are operating. Windsor Mine, near West Liberty, W.Va, and Muskingum River Mine, near Cumberland, Ohio, currently are idled. CONSOL plans to activate Windsor Mine and Muskingum River Mine on July 5, 2001.

CONSOL expects the four mines to produce about 575,000 tons per month, on aggregate, but all four mines have limited economically mineable reserves. As a result, CONSOL plans to expand its McElroy Mine, near Moundsville, W.Va, and its Robinson Run Mine, near Shinnston, W.Va, to meet the new supply agreement requirements as the former AEP mines deplete.

The McElroy preparation plant will be enlarged and a second longwall mining system will be added at the McElroy Mine to lift output from approximately 7.1 million tons per year to 12.5 million tons by the fourth quarter of 2003. Robinson Run Mine also will expand its preparation plant, increasing output from about 6 million to approximately 7 million tons per year.

"The significance of the agreement is that we can expand, through McElroy Mine, production from our large reserve base of high-Btu coal along the Ohio River," Harvey said. "McElroy is a great mine with an experienced work force and good mining conditions."

AEP will also market a portion of CONSOL's coalbed methane production. CONSOL is the second largest producer of coalbed methane in the USA.

"Our coal/gas multi-fuel production strategy continues to provide synergistic benefits to us," Harvey said. "Our arrangement with AEP will allow us to lower our gas marketing costs. More importantly, it allows us to do business with a large power generator on a multi-fuel basis. Two-thirds of the power generated in the US comes from burning coal or gas, the two fuels we produce."