Westmoreland Coal Co. is seeking approval from a bankruptcy court to sell its Buckingham coal mine in Ohio to an as-yet-unformed holding company and give that company the opportunity to acquire 15 other mines.
The Colorado-based coal producer, which filed for Chapter 11 bankruptcy protection in October and plans to emerge by the end of February 2019, wants to sell the Buckingham mine for $1 million to CCU Coal and Construction LLC, according to a motion filed Dec. 21 in the U.S. Bankruptcy Court for the Southern District of Texas.
CCU Coal, according to the filing, "has not yet been legally formed" but is envisioned as a holding company wholly owned by Charles Ungurean, the founder of Oxford Resource Partners LP. Westmoreland acquired Oxford Resource Partners' general partner in 2015. Ungurean also co-founded Oxford Mining Co. LLC, a subsidiary of Westmoreland's limited master partnership, and previously served on the board of the MLP's general partner.
The Buckingham thermal coal mine, an underground operation in Perry County, Ohio, produced 592,440 tons of coal in 2017 and 702,382 tons through the third quarter of 2018, U.S. Mine Safety and Health Administration data shows. All of the mine's coal is shipped to the Conesville power plant, according to an S&P Global Market Intelligence analysis of federal fuel contract data; the plant, operated by a subsidiary of American Electric Power Co. Inc., said in June that it would no longer buy coal from the mine after its contract expires on Dec. 31.
Westmoreland previously announced its intent to sell its core assets and some noncore assets to the highest bidder or else exchange them to relieve debt from creditors if there is no higher offer.
The court filing said Westmoreland had attempted to market the Buckingham mine, a noncore asset, to 37 potential buyers but that CCU's proposal was the only one that offered both the assumption of significant reclamation liabilities and a cash payment to Westmoreland.
Because the coal supply agreement for Conesville is not expected to be replaced, "the principal value of the Buckingham mine is driven by cash flows generated in 2019," Westmoreland wrote. "It is for this reason that the [debtors] believe the value of the Buckingham mine to potential buyers will significantly decline throughout 2019."
The motion also sought approval of an option agreement that would allow the successful bidder for 15 mines owned by Oxford Mining to transfer those assets to CCU Coal.
Seven of the mines, located in Ohio and Kentucky, are active while eight are in reclamation. The price would range from $16 million if the transaction closes before Jan. 31, 2019, to $20 million if it closes by April 30. The option would expire if the transaction does not close by the end of April 2019.
CCU Coal would assume only reclamation liabilities for the properties, while Westmoreland would retain employee obligations and black lung responsibilities.
The bankruptcy court scheduled a hearing on the motion for Jan. 16, 2019.