Sunoco to move forward with separation of SunCoke following settlement
Sunoco said that it will move forward with the planned separation of SunCoke Energy after reaching an agreement with ArcelorMittal that resolves the lawsuit concerning coke pricing for the Jewell facility. Additional information regarding the planned separation of SunCoke Energy from Sunoco will be discussed on a February 3 earnings call.
The settlement agreement, which is effective retroactively to January 1, 2011, includes the following terms:
*Renegotiation of the Jewell coke contract, including the elimination of the Jewell coal cost multiplier and an increase in fees. The pricing of Jewel coal will be based upon the third-party coal price at SunCoke's Haverhill facility.
*Renegotiation and increase in fees paid under the Haverhill agreement.
*The take-or-pay basis of the Jewell and Haverhill agreements with ArcelorMittal will be extended through 2020. This extension provides SunCoke a guaranteed outlet for this coke production through 2020. Both of these contracts were previously structured to convert to a basis of ArcelorMittal's US requirements effective October 2012.
*No compensatory damages.
Based upon the guidance assumptions that the company previously provided, the impact of this settlement for 2012 is estimated to reduce EBITDA by approximately $60 million. The company withdraws its previous SunCoke guidance and will update guidance for the settlement as well as other business factors on the upcoming fourth quarter earnings call.
"I am pleased that the settlement agreement we have reached allows us to put this matter behind us and move forward with our plans to separate the coke business and unlock shareholder value," said Lynn L. Elsenhans, Sunoco's chairman and chief executive officer.
"The settlement is an important step in resolving a dispute with our largest customer. We continue to prepare SunCoke for successful operation as a stand-alone entity. We recently purchased coal assets contiguous to our Jewell operations, finalized our headquarters location in suburban Chicago, and began hiring additional key leadership," said Frederick A. "Fritz" Henderson, who will serve as chairman and chief executive of SunCoke Energy upon its separation from Sunoco. "We also continue to pursue growth opportunities in the US and abroad."
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