Oct 2, 2007 - Knight Ridder Tribune Business News
Author(s): Wayne Heilman

Oct. 2--Colorado Springs-based Westmoreland Coal Co. said Monday it has ended a yearlong dispute with the only customer of its second-largest mine, averting a possible closure.

A Westmoreland subsidiary signed a new agreement to supply coal from its Jewett Mine in Texas to an adjacent power plant owned by NRG Energy Inc. Coal sales from the plant make up 29 percent of Westmoreland's coal sales and more than one-fourth of its a nual revenue. NRG's Texas subsidiary agreed to buy 6.7 million tons of coal next year and has an option to determine how much coal it wants to buy from the mine from 2009 to 2017. NRG agreed to pay all of Westmoreland's production costs and capital spending plus a pe -ton markup. The dispute between the two companies had gone into arbitration, but Westmoreland rejected the price determined by the arbitrator.

"We are pleased to be able to continue to supply lignite (a type of coal) to NRG Texas," Westmoreland President Keith Alessi said Monday in a news release. Colorado Springs-based Westmoreland also bought out its partner in another mine, meaning the company now wholly owns all five of its mines. Idaho-based Washington Group International Inc. had owned 20 percent of Westmoreland's Absaloka Mine in Hardin, M nt. Westmoreland settled a lawsuit and other contract disputes with Washington Group in March by buying out Washington Group's contract to operate the mine. Washington Group agreed in May to be acquired by San Francisco-based URS Corp. for $2.6 billion. Alessi said in a second news release, also issued Monday, that acquiring full ownership of the Absaloka Mine will allow Westmoreland to "combine certain functions with those at other operations and provide for administrative and operational efficiencies " The two mine deals come as Westmoreland is in the midst of restating financial results for the second time in 10 months -- this time for understating retiree medical costs. The restatement will delay company plans to raise at least $85 million from exis ing shareholders. The company's stock rallied on the news but lost 13 cents Monday to close at $19.89, even as the Dow Jones industrial average hit a record.

Westmoreland owns three other mines in Montana and North Dakota as well as a power plant in North Carolina and an interest in another power plant in Fort Lupton.

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