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Arch Coal announced this week it had completed the sale of its 4.8 million subordinated units, 42.25% of NRP's general partner interests and 10% of the incentive distribution rights owned separately by Arch to the private investment group. The transaction however does not include the 2.9 million common units of NRP owned by Arch.
“This transaction is part of a long-term effort to monetize the value of assets that were previously undervalued on our balance sheet, while providing us with a timely infusion of cash that can be applied to the proposed acquisition of Triton Coal Company," said Arch CEO Steven Leer.
In October 2002, Arch contributed assets to NRP that were valued at US$85 million on its balance sheet. Through the sale of units at the time of the IPO and the transaction described above, Arch has sold a portion of its stake in NRP for total proceeds of $148 million.
"Arch's remaining 2.9 million common units have a current market value of more than $110 million, and these common units continue to represent an excellent investment," Leer said.
Arch plans to use the US$220 million cash on hand to finance the Triton acquisition.
Arch still remains a significant lessee of NRP with four leases that account for approximately 15% of NRP's revenues.
As a result of the transaction, Arch CEO Steven Leer will step down from the board of directors of NRP and will be replaced by Alex Krueger. Krueger joined First Reserve in 1999 as a vice president and is focused on First Reserve's investment efforts in the coal and energy infrastructure sectors.
NRP had recorded a net income of US$10.1 million or US$0.44 per unit for the third quarter but had made revisions to its income outlook due to the Pinnacle mine fire. Due to the mine idling, NRP had revised its guidance for 2003, anticipating net income would be between US$36 and US$38 million.
If Pinnacle does not sell any coal from the mine in the fourth quarter it would result in a loss of approximately US$1.6 million in coal royalty revenue. Authorities are yet to re-enter the Pinnacle mine.
