BHP Billiton Sells Navajo Mine Coal Company to Navajo Nation

Thursday, March 26, 2015

Working shoulder to shoulder with its client BHP Billiton New Mexico Coal, Inc. (BBNMC) and other co-counsel, Modrall Sperling completed a series of interrelated transactions between BBNMC and subsidiaries, Arizona Public Service Company, the Navajo Nation and Navajo Transitional Energy Company, LLC (NTEC), a wholly owned enterprise of the Navajo Nation ("Nation").  The transaction marks one of the most substantial and innovative recent energy transactions in Indian country.  The successful closing followed lengthy due diligence, detailed discussions promoting creative deal structures, navigation of Navajo Nation legislative and executive processes, and an evolving power plant regulatory regime.  

The multi-faceted transaction included, among other elements, the sale of BHP Navajo Coal Company (BNCC), the owner/operator of the Navajo Mine, a large surface coal mining operation on the Navajo Reservation, to NTEC and for operation of the mine for a period of years by a BBNMC subsidiary.  The Mine is the sole supplier of coal to the Four Corners Power Plant (FCPP), and the $85 million purchase price will be paid through coal sales to FCPP.  Hand in hand with completing those steps, the negotiators crafted new and amended coal supply agreements with owners of the FCPP, a coal-fired generating station located on the Navajo Reservation in northwestern New Mexico, to ensure a market for the coal reserves that NTEC acquired. 

The transactions allow (a) continued operation of the Navajo Mine and the FCPP; (b) preserving hundreds of high-paying jobs for the predominantly Native American workforces of the mine and plant; and (c) continued significant royalty and tribal tax revenue streams for the Navajo Nation to support its governmental services. 

Modrall Sperling was counsel for the BHP Billiton entities involved.  For more information, please contact Walter E. Stern at western@modrall.com.