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Indiana utility to exit coal mining sector

World Coal,

One of the last remaining US utilities to own any coal mines is to withdraw from the coal mining sector, amid continued uncertainty over the fate of US coal mining.

Vectren is set to sell its Vectren Fuels subsidiary to Sunrise Coal for almost US$ 300 million.

The Evansville, Indiana-based company said it will focus on growing its energy services and infrastructure services segments.

The transaction, expected to close in the third quarter, should net Vectren about US$ 280 million in cash, which will be used mainly to retire US$ 200 million of low-interest Vectren Capital bank loans, Carl Chapman, the company's chairman, president and CEO, told analysts during a conference call.

Vectren Fuels owns three underground steam coal mines in southern Indiana – Oaktown No. 1 and No. 2 and Prosperity – that produce more than 7 million short tpa of high-sulfur coal.

Vectren South, an electric utility that serves more than 140,000 customers in Evansville and several surrounding counties, purchases some of the coal produced by Vecrten Fuels as per contract conditions. These contracts will transfer to Sunrise Coal, which is a subsidiary of Hallador Energy, according to Vectren spokeswoman Chase Kelley.

Vectren Fuels has been losing money for about a year, although its losses have narrowed in recent months. It lost US$ 1.1 million in Q1 2014 after piling up US$ 6 million in red ink a year earlier.

While coal mining results are improving, Chapman said the company ultimately decided that over the near-to-intermediate term, coal mining was not likely to meet key criteria for Vectren’s non-utility investments.

Longer term, Chapman said, coal demand is expected to remain under increased pressure from US Environmental Protection Agency policies, including greenhouse gas emissions rule issued on 2 June.

"Given our company's emphasis on growing our infrastructure and energy services businesses," he said, "now is the right time for us to divest of these commodity-based assets."

Edited from various sources by Sam Dodson

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