The acquisition was announced July 1 between Hallador, based in Denver, Colorado, and Vectren Corp., an electric and natural gas utility headquartered in Evansville, Indiana. Vectren decided to sell Vectren Fuels, owner of the Oaktown Nos. 1 and 2 deep mines in Knox County, Indiana, and the Prosperity underground mine in Pike County, Indiana, after being in the coal mining business for nearly two decades.
Sunrise operates the Carlisle underground mine in Sullivan County, Indiana, and the Ace in the Hole surface mine in Clay County, Indiana. Together, those two mines produce more than 3.5 million tons of thermal coal annually.
With the addition of the Vectren mines, Sunrise anticipates yearly output of about 9 million tons from the five Illinois Basin operations.
Hallador said the two Oaktown mines, Carlisle and the proposed War Eagle underground thermal coal mine in Lawrence County, Illinois, “will become one large underground complex representing 161 million tons of controlled reserves, with three portals, two wash plants and two rail facilities.”
During the past year, the Oaktown mines sold 5.1 million tons, Prosperity sold about 1.8 million tons and Sunrise sold 3.2 million tons from Carlisle. Current 2015 sales for the four mines are about 9 million tons.
Carlisle, the largest contributor to Hallador’s revenue and earnings, is selling more than 90% of its coal this year to utility customers with large scrubbed power plants in Indiana.
Hallador will lose one of those customers, however, when Indianapolis Power & Light Co. (IP&L) stops burning coal at its 427-megawatt Harding Street Unit 7 power plant in downtown Indianapolis in 2016, when it is converted to natural gas. This summer, IP&L, a subsidiary of AES Corp., reversed a previous decision to install additional pollution controls on Unit 7 so it could continue burning coal.
IP&L spokeswoman Brandi Davis-Handy said a new internal analysis by the utility showed it would cost almost double — close to $200 million — for Unit 7 to comply with the federal Environmental Protection Agency’s new wastewater mandates.
“This decision didn’t happen overnight,” she said. “It’s coming from a lot of ongoing analysis. The decision is being made because it’s the best option for our customers.”
Once the Harding Street conversion is completed, IP&L will have one major coal plant, 1,752-megawatt Petersburg in Pike County. The utility has no plans to retire Petersburg or switch it to gas.
Sunrise currently supplies coal to Harding Street under contracts that extend through 2015. Sunrise is contracted to sell up to 1.3 million tons to IP&L in both 2014 and 2015. Sunrise has no coal contracted with IP&L for 2016.
Brent Bilsland, Hallador CEO and president, said Harding Street represented 14% of his company’s total sales following the Vectren Fuels acquisition. “We are confident we can replace these sales by 2016,” he said.
