Coal Age

MAR 2014

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16 www.coalage.com March 2014 of generation capacity, exiting a merchant power business the company says increasingly produces "volatile returns" in a com- petitive market. The decision was not entirely unexpected, especially after the Ohio Public Utilities Commission on February 14 denied Duke Energy Ohio's request to charge customers $729 million through May 31, 2015, to reflect higher capacity prices. The request was strongly opposed by a number of Ohio consumer groups and rival utilities. Duke has retained Morgan Stanley and Citigroup to advise the Charlotte, N.C.-based company during the sale that is expected to fetch up to $2 billion. The coal and gas plants could be sold sepa- rately, although Duke doubted that would happen. Eleven of the plants are located in Ohio, one is in Illinois and one is in Pennsylvania. Duke said it will take a pretax impairment charge of $1 billion to $2 billion during the first quarter in connection with the transaction. While it is divesting ownership in six coal plants in Ohio, Duke is holding onto its regulated utilities in Ohio and Kentucky. "We remain fully committed to our Duke Energy Ohio and Kentucky regulated utilities and the 1.3 million customers we serve in those states," said Lynn Good, the company's president, CEO and vice chairman. "These utilities are not a part of this strategic process." Included in the planned sale are several major coal plants, including Duke's portion of the 2,400-megawatt Stuart generating station in Aberdeen, Ohio, and its share of the 1,300-megawatt Zimmer station in Moscow, Ohio. Both Stuart and Zimmer also a r e p a r t i a l l y o w n e d b y A m e r i c a n E l e c t r i c P o w e r a n d D a y t o n Power & Light. LC Energy Buys Lily's Landree Mine Bankrupt southern Indiana coal producer Lily Group has a new owner that is expected to reopen the idled Landree underground thermal coal mine this spring and deliver a court-ordered reduced amount of coal to Indianapolis Power & Light Co. in 2014. LC Energy Holdings LLC, an assignee of Platinum Partners Credit Opportunities Master Fund LP, a New York-based hedge fund, ended up with Lily after bids submitted by Third Set Advisors, formed by Central Appalachian coal producer Quest Energy, and Redwine Management Company were not accepted during a court- sanctioned auction. LC Energy is expected to pay less than $20 million for Lily and its 38.9 million tons of low-sulfur, low-chlorine coal. In late February, Lily attorneys were working to finalize the sale agreement with LC Energy, and a final deal was anticipated by early March. After the ink dries on the accord, LC Energy was expected to begin making plans to resume production at Landree, a Sullivan County con- tinuous miner operation that has not produced coal since mid- September, shortly before Lily filed for Chapter 11 reorganization in U.S. Bankruptcy Court for the Southern District of Indiana. IP&L;, a subsidiary of AES Corp. of Arlington, Va., asked the judge for permission to terminate the coal sales contract early in the bank- ruptcy case. However, Judge Frank J. Otte on February 18 assigned the unexpired contract to LC Energy, albeit at reduced tonnage, after ruling the move was in the best interest of Lily's estate, credi- tors and other parties. Otte ordered Lily's new owner to obtain a $1 million perfor- mance bond by March 1, and decreased the amount of coal to be delivered to IP&L; under the remaining agreement to 160,000 tons before the end of this year. The judge said LC Energy/Platinum must begin sending coal to the utility, at the rate of 20,000 tons a month, starting May 1. Under the original arrangement, Lily was to ship 200,000 tons from Landree to IP&L; in 2012, and 400,000 tons in both 2013 and 2014. But n e w s c o n t i n u e d Cloud Peak Funds Endowed Scholarship at Montana Tech Cloud Peak Energy recently donated $20,000 to Montana Tech of the University of Montana as part of an ongoing partnership with the school. Since 2012, Cloud Peak Energy has contributed $60,000 to Montana Tech through the Cloud Peak Energy Endowed Scholarship. The scholarship, a commitment by Cloud Peak Energy for five years, has fostered a great recruiting relationship while making a positive impact on higher education in the state of Montana. "We are pleased to know the scholarship funds will help to continue the development of high-quality students at Montana Tech," said Colin Marshall, Cloud Peak Energy president and CEO. "Our company values higher education and the role it plays in the mining industry in Montana. Cloud Peak Energy is proud to employ several Montana Tech alumni at its Spring Creek mine, which is Montana's largest coal mine." The Cloud Peak Energy Endowed Scholarship was developed in 2012 to support students who meet specific eligibility requirements at Montana Tech. In addition to basic guidelines including GPA and involvement in extracurricular activities, the scholarship rotates among students enrolled in mining engineering, environmental engineering and occupational safety and health. The Cloud Peak Energy Endowed Scholarship is awarded to two students each year. "We are thankful for our partnership with Cloud Peak Energy," said Montana Tech Chancellor Don Blackketter. "This donation will be used to sup- port our greatest resources — our faculty and students. Working with our local legislators and Cloud Peak Energy, we are making an impact locally, across the state of Montana, and even nationally." Montana Tech is located in Butte, a southwestern Montana town with an abundant mining history. The four-year institution offers four schools and col- leges and prides itself on its exemplary School of Mines and Engineering — the alma mater of many Cloud Peak Energy employees. 2 0 1 4 A W A R D S Cloud Peak Energy presents a donation for $20,000 to Montana Tech as part of an ongoing partnership with the school at an event in Butte, Mont., on Wednesday, February 12, 2014. From left to right: Chancellor Don Blackketter, Greg Mager (Cloud Peak Energy), Chris Anderson (MT Tech student and past Cloud Peak Energy intern), Vice Chancellor Joe McClafferty, Sen. Jon Sesso, Sen. Gene Vuckovich, Rep. Pat Noonan, Mark Clagett (MT Tech student and past Cloud Peak Energy intern) and Rep. Ryan Lynch. CA_pg04-23_V2_CA_pg06-23 3/12/14 12:31 PM Page 16

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