The shaky future of coal and the need for stable growth were among the reasons provided Wednesday by Vectren’s president for the utility’s decision to sell its coal-mining subsidiary, which employs more than 800 miners.
“Overall, coal demand across the country is expected to remain under pressure due to EPA-related policies including the new carbon emission education goals just issued in June,” said Carl Chapman, Carl Chapman, president, chairman and CEO of Vectren, during a conference call Wednesday.
Vectren announced Tuesday evening it’s selling its Evansville-based coal-mining offshoot, Vectren Fuels, to Sunrise Coal, a subsidiary of Hallador Energy, for $296 million.
The sale is expected to be completed by the end of the third quarter this year.
While coal’s future, including the stability of the Illinois Basin, were factors in the decision to sell, Chapman said ultimately the divestment will bring the publicly-traded energy company more stable, consistent growth in the future.
Vectren, which has now divested all its non-utility subsidiaries, expects to have $280 million in cash after the sale.
Chapman said the company plans to put the money toward retiring $200 million of bank term loans and paying down its outstanding short-term debt.
Vectren Fuels owns three coal mines in Southwestern Indiana that employ nearly 850 miners.
The jobs of the 850 miners are not guaranteed in the sale. Chapman said, though, Sunrise Coal will hold job fairs soon and that the miners currently employed at the mines are “well situated to be considered for employment.”
Vectren Fuels’ mines include two operated by Black Panther Mining at Oaktown, near Vincennes, and one in Petersburg operated by Five Star Mining.
The mines collectively produced 6.2 million tons of coal in 2013. In addition to providing 2 million tons for use by Vectren generating plants, coal from the mines is also sold to Indianapolis Power & Light, Hoosier Energy at Bloomington and Jacksonville Electric Authority at Jacksonville, Florida. Vectren will still receive coal form Vectren Fuels, entering into a staggered agreement which will guarantee the energy company 2.5 million tons of coal, give or take 20 percent, annually.
Vectren provides natural gas to 680,000 customers in Indiana and 314,000 customers in Ohio, and also provides electricity to 142,000 customers in Southwestern Indiana.