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13 questions on NTEC's bid to buy Powder River Basin coal mines from bankrupt Cloud Peak

August 01, 2019
Karl Cates and Seth Feaster and David Schlissel and Dennis Wamsted
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Key Findings

NTEC is presumably aiming to turn the Cloud Peak mines around in a bid that, if successful, would support local payrolls in Montana and Wyoming and would also sustain tax and royalty revenues for local and state governments there.

NTEC does not operate the Navajo Mine. The mine is directly managed and operated by Bisti Fuels, a subsidiary of Dallas-based North American Coal, and NTEC has no actual mine-operations experience.

NTEC has not published a business plan for its acquisition of the Cloud Peak mines and how it plans to turn them around. Production has been in decline for years at all three mines.

Executive Summary

The Navajo Transitional Energy Company (NTEC), wholly owned by Navajo Nation, has proposed buying three coal mines (Antelope, Spring Creek and Cordero Rojo) owned by the recently bankrupt Cloud Peak Energy.

NTEC proposes spending $15.7 million in cash, signing onto a $40 million promissory note, paying $20 million in overdue accounts payable and paying $94 million in back taxes and royalties. The deal would come also with ongoing royalty payments to Cloud Peak and $400 million in reclamation and lease-bond obligations.

An IEEFA report published last week— "Proposed Navajo Acquisition of Bankrupt Coal Company Is an IllTimed Gamble”— describes the many significant risks such a transaction would bring.

That report questioned the revenue projections NTEC has tied to the project. It also questioned what appears to be an outdated mindset among the executives who operate NTEC. This follow-up raises 13 questions around the deal—not just about the business prudence of the proposed acquisition but also whether it was put together properly and if it comports with NTEC’s responsibility to its owner, Navajo Nation.

Please view full report PDF for references and sources.

Press release: IEEFA U.S.: 13 questions on Navajo Transitional Energy Company’s proposed acquisition of bankrupt Cloud Peak’s Montana and Wyoming mines

Karl Cates

Former IEEFA Transition Policy Analyst Karl Cates has been an editor for Bloomberg LP, an editor for the New York Times, and a consultant to the Treasury Department-sanctioned community development financial institution (CDFI) industry.

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Seth Feaster

Seth Feaster is an energy data analyst whose work focuses on the coal industry and the U.S. power sector.

Before joining IEEFA, he created visual presentations at the New York Times for 25 years with a focus on complex financial and energy data; he also worked at The Federal Reserve Bank of New York. 

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David Schlissel

David Schlissel has over 30 years of experience as a regulatory attorney and consultant on energy and utility issues. He has testified as an expert witness before regulatory commissions in more than 35 states and before the U.S. Federal Energy Regulatory Commission and the Nuclear Regulatory Commission.

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Dennis Wamsted

At IEEFA, Dennis Wamsted focuses on the ongoing transition away from fossil fuels to green generation resources, focusing particularly on the electric power sector.

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