NTEC Quietly Approved As Cloud Peak Mines' Buyer

Oct 3, 2019

Cloud Peak's Gillette-based Cordero Rojo mine.
Credit Cloud Peak Energy

On October 2, the U.S. Bankruptcy Court for the District of Delaware approved the Navajo Transitional Energy Company, LLC (NTEC) to purchase Cloud Peak's assets including the Antelope and Cordero Rojo mines in the Powder River Basin. It comes a month and a half after the Navajo Nation-company won in the initial auction.

In a court filing, attorneys explained the decision presented the best opportunity to realize value.

"The total consideration provided by the Purchaser for the Purchased Assets is the highest or otherwise best and most feasible offer received by the Debtors," the filing read.

NTEC's winning bid includes $15.7 million in cash, a five-year commitment to royalty payments on tons of coal produced, assumption of $40 million in high-priority debt plus $20 million in post-petition payments.

Low Valued Mine

In the August monthly operating report, Cloud Peak significantly lowered the valuation of the Antelope Mine from the previous 8K. Once valued at $487 million, the most recent filing now reflects the post-auction value as only $31.3 million.

Clark Williams-Derry, director of energy finance at Sightline Institute, said that's a big deal.

"The market value of this enormous mine that produces tens of millions of tons of coal per year is now just… it's not nothing, but it's not worth half a billion dollars, what it used to be. It's a tremendous evaporation of value," he said.

July Valuation From Cloud Peak Monthly Operating Report
Credit Cloud Peak Energy
August Monthly Operating Report
Credit Cloud Peak Energy

Still To Come

NTEC cannot take over operations until the deal is closed. That will require various permit transfers as well as replacement of surety bonds that guarantee clean-up costs.

Williams-Derry said the replacement of those bonds is a story in itself.

"I don't think surety companies are going to let NTEC just replace its surety bonds unless they get the backstop from the Navajo nation which is what the Navajo nation has done for the Navajo mine and generating station," he said.

The Navajo Nation is not mentioned in the court filing, but Williams-Derry said NTEC could approach the nation's leadership once the sale is closed to request backing.

The court docket includes an agenda of matters for a hearing on October 4. There are still two unresolved objections or responses to the sale. The remaining deliberations will take place over the phone according to the document: "On October 2, 2019, the Court entered an order granting the relief requested. Accordingly, a hearing regarding this matter is not required."

Have a question about this story? Contact the reporter, Cooper McKim, at cmckim5@uwyo.edu.