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Retiring FirstEnergy Solutions coal plants are major Murray Energy customers

The impending retirement of two FirstEnergy Solutions Corp. coal-fired power plants could create significant exposure for Murray Energy Corp., owner of two Northern Appalachia mines that sent more than a quarter of their coal to the plants in 2017.

FirstEnergy Solutions, or FES, announced Aug. 29 that it would deactivate its 2,490-MW Bruce Mansfield coal plant in Pennsylvania by June 1, 2021, and committed to closing down the last of the units at its 2,210-MW W.H. Sammis power plant in Ohio by June 1, 2022. Murray Energy's Marshall County and Ohio County coal mines in West Virginia shipped 25.9% and 29.4%, respectively, of the coal they produced in 2017 to the two power plants. The amount of coal delivered to the power plants accounts for roughly 11.8% of the 40.5 million tons of coal production from Murray Energy's six active Northern Appalachia coal mines in 2017.

Moving that coal to other consumers could be tough in a mining region that one producer said is "pretty much in balance" at current supply levels, with export opportunities taking off some of the pressure created by power plant retirements. A previous analysis showed Murray Energy produced about 57.3 million tons of coal in 2017, though that figure does not include mines recently acquired from Armstrong Energy Inc.

FES, the competitive subsidiary of FirstEnergy Corp., asked a bankruptcy court to allow it to reject a 6.5 million-ton annual coal supply contract with Murray Energy earlier this year due to a significantly reduced need for coal. FES projected it would need just 2.5 million tons of coal in 2018 and just 3.6 million tons of coal to operate in 2019.

Murray Energy and FirstEnergy are among the few companies that have publicly supported the Trump administration's efforts to save coal-fired power plants from retiring. Those efforts have varied in scope, from considering emergency orders for specific power plants up to broad federal policies to support coal and nuclear baseload power units.

The FES plant closures, subject to review by PJM Interconnection, could be reversed if policies are put into place that would "compensate generators for the resiliency and fuel-security attributes that the plants provide," FES said in a news release.

"The federal government is currently considering policy measures that would support fossil and nuclear-generating facilities considered at risk in the current market environment, but vital to grid security and reliability," FES noted in its filing. "Depending on the timing of any federal policy action, deactivation decisions could be reversed or postponed."

Mary Anne Hitt, senior director of the Sierra Club's Beyond Coal campaign, said the announcement makes it clear the plants are "old, dirty and too expensive" to compete in the market.

In communications to the administration, Murray Energy had suggested it would be forced to follow FES into bankruptcy, but the coal producer has since changed its stance. Murray Energy CEO Robert Murray said in a July interview with S&P Global Market Intelligence that his investors are well-protected now that the company has completed a refinancing and dealt with the potential consequences of the bankruptcy by finding new customers.

"We took very progressive actions to mitigate our exposure to the FirstEnergy Solutions bankruptcy and have been successful in our efforts," Murray said in a letter to S&P Global Market Intelligence in July. "Short term, Murray Energy does not depend on support from the Trump administration. Longer term, we will, and so will the existence of reliable, resilient, low-cost electric power throughout our country."

Murray Energy declined to comment on the FES announcement.