Murray purchases Consol mines
Consol Energy Inc. announced Monday it is selling all five of its Consolidation Coal Company longwall coal mines and other assets in West Virginia to Ohio-based Murray Energy for a total package worth nearly $3.5 billion.
The purchase will include the McElroy, Shoemaker, Blacksville, Loveridge and Robinson Run mining complexes in West Virginia, certain coal reserves, related river transportation and dock facilities and other assets. The mines produced a combined 28.5 million tons of coal last year.
Consol is keeping the Buchanan Mine in Virginia and the Pennsylvania operations, which include the Bailey, Enlow Fork and soon-to-be-completed BMX mines. Consol has been shifting its growth focus from coal to gas to comply with environmental regulation trends. Officials at the Pennsylvania-based Consol said today the deal is good for long-term growth.
The purchase agreement calls for Murray to pay $850 million in cash and $184 million in value of future payments resulting from the retention of a royalty on select reserves, certain water treatment payments and tolling fees at Conosl’s Baltimore Terminal.
Murray also will assume $2.4 billion of liabilities from Consol including Consol’s United Mine Workers of America 1974 pension trust obligations.
Robert E. Murray, chairman, president and chief executive officer of Murray Energy, believes the acquisition is a reflection of his company’s legacy in the coal industry.
“No company has developed a better legacy with its employees, with its customers, with the financial markets, with the regulatory agencies or with the public in general, over many decades, than has Consol and Consolidation Coal,” Murray said. “Murray Energy intends to preserve this well-earned legacy.”
Murray Energy currently operates six underground longwall mining systems and 23 continuous mining units including the Century Mine and Powhatan No. 6 Mine in Belmont and Monroe counties. Consolidation Coal operates an equal number of each. Murray Energy builds virtually all of its own mining machinery, including the longwall systems.
“With our expertise, we will be able to efficiently operate the acquired Consolidation Coal mines and provide their employees with an opportunity for long-term employment,” said Robert D. Moore, executive vice president, chief operating officer, and chief financial officer of Murray Energy.
“Most especially, Murray Energy operates safe coal mines, with a particular emphasis on fire protection. This will help assure the protection of the health and safety of our new employees,” Murray said. “The combined companies will allow Murray Energy to better serve our electric utility customers with reliable and low cost coal supplies, at accurate qualities. This is truly a momentous time for the combined employees of Murray Energy Corporation and for our company.”
Prior to the transaction, Murray employed 3,300 workers; after the purchase of the Consol mines, the company will employ 7,100 workers.
The annual coal production, as of June 30 was 30.1 million tons and now stands to total 58.6 million tons.
Total coal reserves prior to the buyout were 859 million tons and are expected to top 1.1 billion tons
As for operations, Murray Energy raised its number of active coal mining operations from seven to 12; coal preparations plants from six to 12; longwall mining systems from six to 12; continuous mining units from 23 to 46; and added a reverse osmosis plant.
The company previously operated with three coal transloading facilities and now owns eight; increased its harbor and towboat fleet from three to 26; and acquired 609 barges.
Deutsche Bank Securities Inc. acted as financial adviser to Murray Energy. Goldman Sachs & Co. and Deutsche Bank are providing committed financing to Murray Energy in connection with the transaction; Goldman Sachs is leading the financing. Kirkland & Ellis LLP acted as counsel to Murray Energy.