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Westmoreland Coal acquires San Juan mine for US$127 million

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World Coal,

Through the sale of San Juan Coal Company, Westmoreland Coal Co. has acquired the San Juan mine in Farmington, New Mexico, by its subsidiary Westmoreland San Juan LLC (WSJ) from BHP Billiton New Mexico, for a purchase price of approximately US$127 million, subject to post-closing adjustments.

WSJ assumed operations at the mine on 1 February 2016.

The acquisition of the San Juan mine, which is adjacent to a power plant, expands Westmoreland’s suite of mine mouth mining operations and provides additional coal resources of 148 million short t.

Concurrent with the mine acquisition, Westmoreland entered into a long-term coal supply agreement with the owners of the adjacent San Juan Generating Station (SJGS), requiring SJGS to purchase 100% of its coal from the San Juan mine, with tonnage and pricing adjusting quarterly through 2022.

“The addition of the San Juan mine further enhances our mine mouth business model, which has been fundamental in providing strong cash generation,” commented Kevin Paprzycki, Westmoreland’s CEO. “We look forward to building upon the solid partnership with the SJGS team in the years to come.”

PNM Resources established a new subsidiary, NM Capital Utility Corp., which assisted Westmoreland with the financing to complete the acquisition and helped finance a portion of the transaction. WSJ entered into a US$125 million structured loan with the subsidiary of PNM Resources. The loan is a US$125 million Senior Secured Non-Revolving Term Loan maturing 1 February 2021 and bears initial interest at a 7.25% rate plus LIBOR, which escalates over time.

According to PNM, this transaction secures its customer savings through the finalisation of the new coal supply and participant restructuring agreements for the SJGS. Combined savings from the agreements are estimated to reduce customer costs by more than US$300 million over six years, reducing bills by approximately 5%.

“We believe the San Juan transaction is an overwhelming success for Westmoreland, PNM Resources, and PNM’s customers,” said Paprzycki.

"Reaching this important milestone means that PNM can now move forward with its commitment to deliver these cost savings to our customers," detailed Pat Vincent-Collawn, PNM Resources' Chairman, President and CEO. "Collectively, the elements of the plan for SJGS will provide significant environmental benefits, while minimising the impact to PNM customer bills, as well as the impact to jobs and the New Mexico economy as a whole. Now that the new coal supply and participant restructuring agreements are finalised, we can begin to deliver those benefits to our customers."

Edited from various sources by Harleigh Hobbs

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