In a March 11 announcement, SunCoke said its board of directors supports a plan to drop down over time the company’s entire domestic coke business to its master limited partnership SunCoke Energy Partners L.P. SXC is the sponsor, general partner and largest unit holder of SXCP, holding a 56% limited partnership interest and all the incentive distribution rights.
The company also announced its strategic intent to exit the coal mining business entirely.
It was not the first time SunCoke had revealed details of a possible move with its coal and coke businesses; officials first hinted at examining options for its Jewell Coal arm during its most recent earnings call held January 30.
As a part of management’s multi-year plan, the board of directors approved the initial dropdown of a 33% interest in the Haverhill and Middletown cokemaking operations, in which SXCP already holds a 65% interest. SXC will continue to retain a 2% interest in both facilities.
“We’re in the beginning process of evaluating what options we have in coal mining,” SunCoke spokeswoman Anna Rozenich told Coal Age, noting further discussions about the coal business were precluded until provisions of a tax sharing plan with former parent Sonoco expired in mid-January 2014.
Although terms have not yet been finalized, SXC anticipates SXCP will finance this transaction through a combination of equity and debt.
Rozenich declined to speculate on a potential timeline for the plan other than to say that the producer expects evaluations to take several months.
An adviser, whose identity as not been released, has already been retained in the effort.
SunCoke has identified several factors for its decision to divest its coal business, including challenging geological conditions and higher costs at Jewell as well as the “competitiveness of the entire industry” as of late, according to Rozenich.
One item not playing a role, she noted, was its people.
“It was a difficult decision for SunCoke Energy to make in light of the fine work, commitment and considerable strides made by the coal team over the last several years,” noting that, given the early stages of the talks, information on personnel plans was not available.
Illinois-based SunCoke Energy owns and operates five plants in the United States, one in Vitoria, Brazil and a joint venture with VISA Steel Limited in Odisha, India, and also mines coal from the Jewell operation in southern Appalachia.
The coal operations portion of the Jewell complex in Vansant, Virginia, began initial operations in 1952 and has total annual coal production of about 1.1 million tons.