Two of the top coal producers in the U.S. are joining forces. Peabody Energy and Arch Coal have entered into an agreement to combine their Powder River Basin and Colorado assets in a joint venture. The joint venture will strengthen “the competitiveness of coal against natural gas and renewables, while creating substantial value for customers and shareholders,” the companies said.

The joint venture has a value of $820 million and will be 66.5% owned by Peabody and 33.5% owned by Arch Coal. The companies said they expect to generate $120 million per year over the first 10 years of operation.

“The Peabody/Arch joint venture is an extraordinary example of industrial logic targeted to strengthen the competitive position of our products and create significant value for multiple stakeholders in a low-cost combination with exceptional physical synergies,” said Peabody President and Chief Executive Officer Glenn Kellow. “The transaction unites two strong, culturally aligned workforces with a commitment to core values such as safety and sustainability.”

The combination will create one of the lowest-cost thermal coal suppliers in the U.S., according to the two companies.

“We are excited about this transaction’s potential to enhance the value of Arch’s top-tier thermal coal assets,” said Arch Chief Executive Officer John W. Eaves. “This new joint venture should allow us to realize the full potential of our valuable assets in the Powder River Basin and Colorado and benefit our customers in the process.”

The joint venture will combine Peabody’s North Antelope Rochelle Mine (NARM) and Arch’s Black Thunder Mine into one complex. The companies said this synergy will allow the joint venture to reduce costs.

Other assets included in the venture are Arch’s West Elk Mine, which the companies believe will enhance Peabody’s Twentymile Mine in Colorado. The Caballo, Rawhide and Coal Creek mines will also be integrated.

The joint venture will have a five-member board of managers appointed by Peabody and Arch. Each party will have voting rights in proportion to its ownership percentage, with certain items requiring supermajority approval. Peabody will be the operator and manage all activities, including the marketing of coal.

Peabody and Arch will continue to operate the assets independently until closing of the transaction.

In 2018, on a combined basis, the assets shipped 206 million tons of coal and had a workforce of approximately 3,300, with combined proven and probable reserves totaling 3.4 billion, as of December 31, 2018.