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Should you expect big US coal mergers and acquisitions soon?

PART:
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Part 9
Should you expect big US coal mergers and acquisitions soon? PART 9 OF 10

Ambre Energy sells North American business to private equity player

Ambre Energy deal

Last month, within a couple of months of buying Cloud Peak Energy’s (CLD) stake in the Decker mine in Montana, Ambre Energy announced that it was moving out of the North American business by selling its mining assets and port projects to Resource Capital Funds (or RCF), a private equity firm based in Denver.

Ambre Energy is headquartered in Australia. It wants to get out of the North American business since it doesn’t see a recovery in coal prices until 2019–20. RCF already owned 55% of Ambre Energy’s North American subsidiary before the deal.

Ambre Energy sells North American business to private equity player

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The deal

As a part of the deal, Ambre Energy will sell its North American business to RCF for $18 million. Most of this total will go into repaying debt extended by RCF to Ambre Energy earlier. The deal will also give Ambre Energy a chance to buy back its shares held by RCF. The deal includes:

  1. The Decker Mine and Black Butte mine in PRB
  2. Big Horn coal deposits in PRB
  3. The Morrow Pacific Project in Oregon
  4. The Millennium Bulk Terminals – Longview (or MBTL) project in Washington State

After the deal, Ambre Energy will have an 8% non-voting share in the North American subsidiary, the oil shale business in Utah, and the Australian properties.

Is the future of Powder River Basin exports in danger?

Ambre Energy was instrumental in proposing Powder River Basin exports to Asia. The company came up with the Morrow Pacific project and MBTL to use ports in the Pacific Northwest for this goal. However, the future of these projects looks uncertain. Oregon State has withheld a key permission for the Morrow Pacific project in August. Environmentalists and regulators continue to fight over the impact on the climate.

Yet the deal in itself doesn’t signal any new troubles. RCF was already holding a significant stake in Ambre Energy, and the transaction is classified as a related-party transaction. PRB producers (KOL), including Arch Coal (ACI), Peabody Energy (BTU), and Alpha Natural Resources (ANR), are weighing opportunities to export coal to Asia from these ports.

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