CLEVELAND, June 30, 2021 /PRNewswire/ -- NACCO
Industries, Inc.® (NYSE: NC) announced today that its
wholly owned subsidiary, The Falkirk Mining Company, has entered
into a new Coal Sales Agreement ("CSA") with Rainbow Energy Center,
LLC that becomes effective concurrent with Rainbow Energy's
acquisition of the Coal Creek Station power plant in Underwood, North Dakota, from Great River
Energy ("GRE"). Falkirk operates the Falkirk Mine, which is
adjacent to and the sole supplier of lignite coal to the Coal Creek
Station power plant.
During 2020, GRE announced its intent to retire the Coal Creek
Station power plant in the second half of 2022, but noted it was
also willing to consider opportunities to sell the power plant. On
June 30, 2021, GRE entered into an
agreement to sell Coal Creek Station and the adjacent high-voltage
direct current transmission line to Bismarck, North Dakota-based Rainbow Energy
Center, LLC and its affiliates. Certain owners of Rainbow Energy
control other entities that engage in several aspects of the energy
industry, including oil and gas production and exploration, natural
gas and power marketing, crude oil marketing and other oil and gas
midstream projects. Rainbow Energy intends to operate Coal Creek
Station as a strategic part of its energy marketing, sales and
trading businesses. Rainbow Energy also plans to pursue carbon
capture and sequestration at Coal Creek Station.
The transaction between GRE and Rainbow Energy is subject to the
satisfaction of certain conditions, including regulatory approvals
associated with the sale of Coal Creek Station and the related
transmission assets, and the posting of a performance bond related
to final mine reclamation. If the conditions are satisfied, the
transaction is expected to close before the end of 2021.
Upon completion of the sale of Coal Creek Station, the existing
Coal Sales Agreement, the existing Mortgage and Security Agreement
and the existing Option Agreement between GRE and Falkirk will be
terminated. Falkirk and GRE will enter into a termination and
release of claims agreement, under which GRE will pay Falkirk
$14.0 million in cash, as well as
transfer ownership of an office building located in Bismarck, and convey membership units in
Midwest AgEnergy to another wholly owned and consolidated
subsidiary of NACCO. NACCO currently owns a modest
investment in Midwest AgEnergy, which operates two ethanol
facilities in North Dakota.
Falkirk's new CSA with Rainbow Energy will become effective and
Falkirk will begin supplying all coal requirements of Coal Creek
Station concurrent with Rainbow Energy's acquisition of the power
plant. Falkirk will be paid a management fee and Rainbow Energy
will be responsible for funding all mine operating costs and
directly or indirectly providing all of the capital required to
operate the mine. Falkirk will perform final mine reclamation,
which will be funded in its entirety by Rainbow Energy. The initial
production period is expected to run ten years from the effective
date of the CSA, but the CSA may be extended or terminated early
under certain circumstances. If Rainbow Energy terminates the CSA
and closes Coal Creek Station before 2027, Falkirk will be entitled
to an additional payment from GRE under the terms of the
termination and release of claims agreement. The additional payment
amount ranges from $8 million if the
closure occurs before 2024 to $2
million if the closure occurs in 2026. To support the
transfer to new ownership, Falkirk has agreed to a reduction in the
current per ton management fee from the effective date of the new
CSA through May 31, 2024. After
May 31, 2024, the per ton management
fee increases to a higher base in line with current fee levels, and
thereafter adjusts annually according to specific indices which
track broad measures of U.S. inflation.
Falkirk delivered a total of 7.2 million tons of lignite coal
during 2020. Coal deliveries in the remainder of 2021 and in 2022
are anticipated to be approximately 7 million tons annualized based
on initial forecasts. Annual delivery levels from 2023 forward
depend on a number of factors, including Rainbow Energy's ability
to sell energy and capacity related to the power plant and Rainbow
Energy's successful implementation of carbon capture and storage at
Coal Creek Station, all of which are out of Falkirk's primary
control.
Forward-looking Statements Disclaimer
The statements contained in this news release that are not
historical facts are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. These forward-looking
statements are made subject to certain risks and uncertainties,
which could cause actual results to differ materially from those
presented. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to publicly revise
these forward-looking statements to reflect events or circumstances
that arise after the date hereof. Among the factors that could
cause plans, actions and results to differ materially from current
expectations are, without limitation: (1) changes to or termination
of customer or other third-party contracts, or a customer or other
third party default under a contract, (2) a significant reduction
in purchases by the Company's customers, including changes in coal
consumption patterns of U.S. electric power generators, or changes
in the power industry that would affect demand for the Company's
coal and other mineral reserves, (3) the ability of the Company to
access credit in the current economic environment, or obtain
financing at reasonable rates, or at all, and to maintain surety
bonds for mine reclamation as a result of current market sentiment
for fossil fuels, (4) failure to obtain adequate insurance
coverages at reasonable rates, (5) the impact of the COVID-19
pandemic, (6) changes in tax laws or regulatory requirements,
including the elimination of, or reduction in, the percentage
depletion tax deduction, changes in mining or power plant emission
regulations and health, safety or environmental legislation, (7)
changes in costs related to geological and geotechnical conditions,
repairs and maintenance, new equipment and replacement parts, fuel
or other similar items, (8) regulatory actions, changes in mining
permit requirements or delays in obtaining mining permits that
could affect deliveries to customers, (9) weather conditions,
extended power plant outages, liquidity events or other events that
would change the level of customers' coal or aggregates
requirements, (10) weather or equipment problems that could affect
deliveries to customers, (11) failure or delays by the Company's
lessees in achieving expected production of natural gas and other
hydrocarbons; the availability and cost of transportation and
processing services in the areas where the Company's oil and gas
reserves are located; federal and state legislative and regulatory
initiatives relating to hydraulic fracturing; and the ability of
lessees to obtain capital or financing needed for well development
operations and leasing and development of oil and gas reserves on
federal lands, (12) changes in the costs to reclaim mining areas,
(13) costs to pursue and develop new mining and value-added service
opportunities, (14) delays or reductions in coal or aggregates
deliveries, (15) changes in the prices of hydrocarbons,
particularly diesel fuel, natural gas and oil, (16) the ability to
successfully evaluate investments and achieve intended financial
results in new business and growth initiatives, (17) the effects of
investors' and other stakeholders' increasing attention to
environmental, social and governance ("ESG") matters, and (18)
disruptions from natural or human causes, including severe weather,
accidents, fires, earthquakes and terrorist acts, any of which
could result in suspension of operations or harm to people or the
environment.
About NACCO Industries, Inc.
NACCO Industries, Inc.®, through a portfolio of
mining and natural resources businesses, operates under three
business segments: Coal Mining, North American Mining and Minerals
Management. The Coal Mining segment operates surface coal mines
under long-term contracts with power generation companies and an
activated carbon producer pursuant to a service-based business
model. The North American Mining segment provides value-added
contract mining and other services for producers of aggregates,
lithium and other minerals. The Minerals Management segment
acquires and promotes the development of oil, gas and coal mineral
interests, generating income primarily from royalty-based lease
payments from third parties. In addition, the Company's Mitigation
Resources of North
America® business provides stream and wetland
mitigation solutions. For more information about NACCO Industries,
visit the Company's website at www.nacco.com.
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SOURCE NACCO Industries, Inc.