Westmoreland Coal Company (Nasdaq:WLB) announced last week on August 24, 2016 that NRG Texas Power (NRG) has provided notice that it will terminate the lignite supply agreement at the Jewett mine two years early on December 31, 2016. Westmoreland will conduct the multi-year reclamation work for NRG following the conclusion of the supply contract.
“As NRG has decided to fuel its plant differently in response to current energy market conditions, we are shifting our focus to providing multi-year reclamation services. We have an outstanding track record of operating the Jewett mine safely and cost efficiently and plan to build on this performance during the reclamation phase,” said Kevin Paprzycki, Chief Executive Officer of Westmoreland Coal Company.
The lignite supply contract with NRG is a cost plus contract which accounts for approximately 2% of Westmoreland’s 2016 adjusted EBITDA guidance. Westmoreland expects to maintain positive cash flow generation at Jewett during the next several years with the cost plus arrangement continuing through reclamation. NRG is responsible for the reclamation liability so Westmoreland does not foresee using cash net of reimbursements for reclamation.
