Coal Age

OCT 2018

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October 2018 www.coalage.com 7 news continued Such a move, FES said, would save it approximately $20 million in 2018 and $14.5 million in 2019 as it attempts to reorganize its debts. But Judge Alan Koschik denied the request on October 2 in a single-sentence ruling on court's website, although he did not give a reason for his decision. Under the sales agreement, FES purchases coal to operate its 2,490-megawatt (MW ) Bruce Mansfield power plant near Ship- pingport, Pennsylvania, and its 1,490-MW W.H. Sammis plant near Stratton, Ohio. FES recently announced plans to retire both Mans- field and Sammis by June 2021 and June 2022, respectively, unless the President Donald Trump administration provides financial incentives to help keep coal plants operating. The Mansfield and Sammis contracts are scheduled to expire at the end of 2028. Ohio-based Murray, the largest privately owned coal com- pany in the United States, supplies Northern Appalachian coal to the plants and has lobbied in support of their continued operation. However, PJM Interconnection, a regional grid operator based in Pennsylvania, determined in early October that closing Mansfield and Sammis in a few years would not adversely impact reliability in the region. According to FES, the Murray agreement provides for mini- mum volume requirements "that cause the coal sales agreement to be burdensome for the debtors." Because of a fire at Mansfield in January and the subsequent non-availability of Mansfield Units 1 and 2, "the volume of coal required to operate the Bruce Mansfield plant has decreased sig- nificantly," FES said. Instead of 6.5 million tons, FES only needs about 2.5 million tons of coal in 2018 and expects to require about 3.6 million tons in 2019 to keep Mansfield and Sammis running. Moreover, there was a 110-day coal stockpile at Mansfield when FES filed its bankruptcy petition. Murray declined to comment on the court ruling while a FES spokeswoman said the company is evaluating its options. They no doubt include appealing Koschik's ruling to a higher court. In late 2013, Murray purchased five longwall mines in West Virginia from Consolidation Coal Co. and subsequently renamed all of them. FES received federal bankruptcy court approval in June to re- ject a 1.5-million-tpy coal supply agreement with Contura Coal related to the Sammis plant. Paringa Signs Second Coal Supply Contract for New Poplar Grove Mine Australia's Paringa Resources Ltd. now has steam coal commit- ments for more than 5.4 million tons from its new Poplar Grove underground mine in McLean County, Kentucky, after signing an agreement in early October with Ohio Valley Electric Corp. (OVEC), whose Indiana-Kentucky Electric Corp. subsidiary operates the 1,303-megawatt Clifty Creek power plant near Madison, Indiana, and 1,086-megawatt Kyger Creek power plant near Cheshire, Ohio. The 650,000-ton contract with OVEC is set to run from 2019 to 2020. Paringa announced the new deal to its shareholders in Aus- tralia, with Todd Hannigan, the company's interim CEO, saying Paringa now has coal supply agreements with "two high-quality customers, providing an excellent platform to expand our sales base when we shortly commence production." CIL subsidiaries have pointed out to the government op- posing coal mining by private miners that labor costs constitutes about 55% of cost of production of government coal compared to about 25% in case of coal currently mined by private steel and power companies for captive consumption. It was expected that most future private miners would bench- mark their cost of production and labor costs to existing captive coal miners and with such lower costs, compete aggressively with CIL, which in the long term, have crippling financial impact on the latter, government companies have stated. South32 Finalizes Purchase of 50% Interest in Eagle Downs in Australia South32 Ltd. has completed the acquisition of a 50% interest in the Eagle Downs metallurgical coal project in Queensland's Bowen Basin. South32 has also assumed operatorship with the other 50% interest in the project held by Aquila Resources Pty Ltd. (Aquila), a subsidiary of BaoWu. The consideration comprises an upfront payment of ap- proximately US$106 million, a deferred payment of US$27 million due three years after completion, and a coal price linked produc- tion royalty that will also be payable and is capped at US$80 million. The upfront payment has been funded from the group's cash reserves. "The acquisition of Eagle Downs embeds another attractive development option within our growing portfolio, with the upfront payment representing a minor premium to the historical infra- structure spend reflecting our move to operating control," said South32 Chief Executive Officer Graham Kerr. "We are pleased to be able to further strengthen our long-standing relation- ship with BaoWu and look forward to working with Aquila to commence the final feasibility study to optimize the mine design and development." Subject to the feasibility study, South32 and Aquila plan to construct a multiseam underground longwall metallurgical coal mine and processing plant with a dedicated rail spur and train loadout facility. Eagle Downs is a large, high-quality and fully permitted metallurgical coal development project located approximately 25 kilometers southeast of Moranbah. The project was placed under care and maintenance in late 2015 having benefitted from initial investment that delivered site infrastructure, in- cluding water supply and high-voltage systems, office buildings and water and sediment dams. Dual 2-km drifts are also approx- imately 40% complete. Turkey Transfers Operating Rights to Private Companies In an effort to reduce the country's reliance on energy imports, Tur- key's Energy Minister Fatih Donmez has transferred the operating rights of seven high-potential coalfields to private companies, Reuters reported. Once a darling of foreign investors, Turkey's en- ergy sector, which relies almost entirely on imports, has been hit by a sharp decline in the lira. The currency has lost nearly 40% of its value this year, sparking worries over its impact on the wider economy and the banking sector. State pipeline operator Botas raised prices for natural gas used in electricity production by 50% in August. Natural gas and Continued from p. 6... 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