Coal firms created by bankruptcy plan to recombine
- June 29, 2018
When Alpha Natural Resources emerged from bankruptcy two years ago, it became two coal mining companies — Alpha and Contura Energy.
By the end of the third quarter of this year, the companies plan to get together again. They announced in April an all-stock merger agreement that, subject to the approval of Alpha shareholders, would combine their operations under the Contura name.
The combined company, led by Contura’s management team, would be based in Bristol, Tenn. Before its bankruptcy, Alpha had its headquarters in Bristol, Va.
Contura shareholders would own 53.5 percent of the combined company while Alpha shareholders would own 46.5 percent. The new company plans to be listed on the NYSE.
In a statement released with the merger announcement, Contura CEO Kevin Crutchfield said improving global coal markets, efficiencies created by divestment of unproductive holdings and “resulting potential cost synergies” offer “an exciting opportunity for value creation” that will “unify some of the best coal miners in the world under one organization.”
By selling mines in Wyoming’s Powder River Basin, Contura removed about $120 million of reclamation liabilities from its books, according to a PowerPoint presentation prepared by the company. The presentation says Alpha’s sale of about 250 permits on inactive properties also relieved it of $167 million in liabilities for reclamation, water treatment and other issues.
The new company expects to save $30 million to $50 million through the merger’s “resulting potential cost synergies.” The companies had a combined net income of nearly $291 million last year.
The presentation says the merger will create the nation’s largest supplier of metallurgical coal, with more than 12 million tons in sales last year and 1 billion tons of reserves. Metallurgical coal, used in steelmaking, is less susceptible to changes in demand than thermal coal, which is used in power-generation.
The new Contura will have 22 underground mines and eight surface mines. Most of those mines are in West Virginia, but seven are in Virginia, and one is in Pennsylvania.
Contura also owns 65 percent of the Dominion Terminal Associates coal export facility in Newport News.
The merger will “materially improve each entity’s operational, financial and risk profiles,” Contura Chairman Neale Trangucci said in a statement.
“Achieving such a turnaround in less than two years is no small task,” Trangucci said. “Our board is proud of and appreciates the diligent work of employees and management of both organizations, and we are very excited about the future of the new combined company.”