Financially ailing Westmoreland Coal Co. — which operates the mine that supplies coal to the San Juan Generating Station in northwestern New Mexico — this week told the U.S. Securities and Exchange Commission it needs more time to complete its annual report because it’s having problems paying debts.
But a spokesman for Public Service Company of New Mexico, which operates the aging San Juan power plant, said there is no reason for PNM customers to be concerned by the Colorado-based coal company’s financial situation.
S&P Global Ratings in November gave Westmoreland a credit rating of CCC, which is considered a junk rating, and warned of possible default for Westmoreland, which has more than $1 billion in debt. On Tuesday, Westmoreland’s stock price dropped by more than 13 percent to less than 45 cents a share.
And a research brief on the coal company published last month by the Institute of Energy Economic and Financial Analysis said Westmoreland’s problems could hurt New Mexico.
“The growing possibility of a bankruptcy by Westmoreland raises risk not just to investors, but to electric ratepayers and taxpayers in some areas where the company does business,” the report said. “Effects could include job losses; loan defaults; mine closures; difficulties in paying for mine reclamation; and local and state and federal government revenue losses. Westmoreland could also run into trouble meeting long-term coal delivery contracts.”
The research brief said those risks are particularly high in New Mexico. The brief said the company borrowed $125 million from an affiliate of PNM, the state’s largest utility, to buy the San Juan mine, which is the exclusive supplier to the San Juan Generating Station near Farmington.
PNM retired two of four units at San Juan in December, cutting coal demand at the plant in half, and announced plans to close the remaining two units by 2022, the brief noted, “raising obvious questions as to how Westmoreland will repay the $125 million loan. Also at issue: the true value of the mine itself.”
However, PNM spokesman Pahl Shipley told The New Mexican, “Neither PNM nor our customers have financial risk or responsibility tied to the remaining debt from Westmoreland’s purchase of San Juan Coal Co. We do not anticipate any impact regarding the availability of coal at San Juan generating Station.”
Shipley added, “It’s important to note that PNM customers continue to benefit from the lower cost of fuel as a result of the coal supply agreement with San Juan Coal Co., which when combined with the benefits of the plant’s ownership agreement, provides savings of approximately $300 million over six years.”
But some have speculated whether Westmoreland, which calls itself the “oldest independent coal company in the United States,” can last another six years.
In its SEC filing Monday, Westmoreland said it needed additional time to file its report, “Due to uncertainty associated with Westmoreland Coal Company’s … ability to meet its debt obligations as they become due.” The filing also mentioned “the anticipated failure of certain financial covenants.”
A news release from the company said Westmoreland plans to report its financial results for the fourth quarter and full year 2017 before April 2.
“In light of ongoing discussions with the Company’s creditors in connection with its capital structure review, Westmoreland will not host a conference call for investors this quarter,” the news release said.