Westmoreland Coal's CEO Discusses Q1 2014 Results - Earnings Call Transcript

Apr.25.14 | About: Westmoreland Coal (WLB)

Westmoreland Coal Company (NASDAQ:WLB)

Q1 2014 Earnings Conference Call

April 25, 2014 10:00 a.m. ET

Executives

Keith Alessi - CEO

Robert King - Director and President

Kevin Paprzycki - CFO

Analysts

Matt Farwell - Imperial Capital

Derek Fernandes - Brean Capital

Tim O'Brien - DG Capital

Brian Taddeo - R.W. Baird

Operator

Good morning, ladies and gentlemen, and welcome to Westmoreland Coal Company's Investor Conference Call. At this time, all telephone participants are in a listen-only mode. (Operator Instructions) As a reminder, this conference is being recorded today and a replay will be made available as soon as practical on the Investor portion of the Westmoreland's website through October 27, 2014.

Management's remarks today may contain forward-looking statements based on the company's projections, current expectations and assumptions regarding the business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict.

The company's actual results may differ materially from the projections given and the results discussed in any such forward-looking statements. For a summary of risk factors and other information regarding forward-looking statements, please refer to the company's Form 10-K for fiscal year 2013 as well as the company's Form 10-Q for the first quarter ended March 31, 2014 to be filed with the Securities and Exchange Commission on April 25, 2014.

Any forward-looking statements represent the company's views only as of today and should not be relied upon as representing its views as of any subsequent date. While the company may elect to update forward-looking statements at some point in the future, it specifically disclaims any obligation to do so, even if its estimates change, and therefore, you should not rely on these forward-looking statements as representing the company's views as of any date subsequent to today.

Mr. Keith E. Alessi, Chief Executive Office of Westmoreland Coal Company will be delivering today's remarks. Thank you. Mr. Alessi, please begin.

Keith Alessi

Thank you, and good morning to everybody on the call. This morning we are going to talk about our Q1 results. We are going to quickly run through the quarter from an operational standpoint and a numerical standpoint, and then we are going to talk some about the Canadian acquisition that's impending here.

The quarter itself was a good quarter. It came in pretty much where we expected it to do so. I know that we've got some new folks on the call who started following the company either with our latest bond issuance or have joined on the equity side. Now, I want to make a couple of comments about our business model, so that numbers can be taken in contact.

We always talk about the fact that we operate in a band of outcomes with our cost-plus business model, where it is pretty much a ceiling above us and a floor below us, and we operate in this band of outcomes depending on numerous factors; weather, customer outages, things of that nature.

Last year was pretty much an unusual year for us, 2013, the timing of certain outages and the way weather broke. Our second quarter last year was one of our strongest quarters, which is not our historical pattern. Our historical pattern is the Q2 is a fairly week quarter for us. The reason I bring that up is, well, our Q1 numbers are certainly up over the last year than where we expected them to be. It's not exactly an apples-to-apples comparison because there were some outages in that Q1 of last year. This year that pattern flips and the outages this year are going to be in Q2, where they weren't in Q2 last year. So, we would expect Q2 to come in under last year, but we still see ourselves operating for the year within that band of outcomes that we so often described. And we are still operating within the guidance range of $112 million to $120 million in adjusted EBITDA for the year. The way things look like, they're shaping up; certainly Q3 and Q4 look like stronger quarters to us in '14 than they were in '13.

I'm going to go ahead and have Bob talk briefly about the operational aspect for the quarter. Kevin will talk about some of the accounting math and deal-related costs, and then I'll be back and chatting about the Canadian operation, where we sit and how we see that rolling out.

Robert King

Okay. Thank you, Keith. I'll start with safety. Westmoreland's mining operations had a really good quarter in the first quarter in the area of safety. Four of our six mining operations went the entire quarter without a reportable accident. And our ROVA power plant continued its excellent performance with zero accidents and incidents. Also, that operation has now gone over three years without a reportable incident, which is an extremely good record.

So the company as a whole achieved both reportable accident rates and lost time frequency rate significantly below the national averages for both mines and power plants. And we are extremely thankful to our employees for their focus and dedication to working safely.

From a market perspective during the first quarter, extremely cold weather and strong gas prices as well as low hydro generation continued to generate high demand for power from our customers. Our customers ran their plants at relative high levels throughout the quarter, and demand for our coal was strong. Gas prices during this period of time were also very good from a generation perspective for coal generators, that is, and remained over $5 for most of the quarter.

Sales and shipments from all of our mines were strong in the first quarter with the exception of Absaloka mine, and at that operation we continue to have -- that operation continue to be negatively impacted by significant railroad disruptions throughout the quarter, as the railroad was unable to meet customer nominations and provide trains to haul coal from the operation.

Fortunately, only one of our mines is impacted by railroad operations. And from that standpoint, I think that differentiates us a bit from our competitors. I'm happy to say that over the last two or three weeks, railroad services improved significantly, and it appears we are back on to a somewhat a normal railroad service for our operation.

Looking forward, we are expecting to be -- have a relatively normal hydro year. During March, the Columbia River system increased significant -- snow pack in the Columbia River system increased significantly. And we are now slightly higher than normal. Based on that, we are expecting, and we're already starting to see some reduction and demand from our customers as hydro picks up. That's the normal pattern, and Keith talked about that at the beginning of the call. We would expect second quarter to see some reduced demand from our customers due to hydro, and this is also the time of the year that they also do major maintenance project on their plants.

Operationally, on the power side of the business ROVA began operating under its restructured power supply contract, the Dominion resources at the beginning of this year. It ran well during the quarter. And it was able to meet all of its commitments Dominion under the new contract and the new arrangement.

Operationally from the mining side, all of that's more on mines again experienced no more major operational or maintenance issues, and performed very well. And as I previously mentioned, ROVA performance issues and lower deliveries than forecasted did however impact our Absaloka mine. And because of that, the performance of that mine and the economics of that mine were impacted in the first quarter.

I'm cautiously optimistic that the majority of the railroad issues are behind us. And as I said before, we're seeing a much better performance over the last few weeks.

With that, I'm going to turn it over to Kevin for the numbers.

Kevin Paprzycki

Okay. Thanks, Bob, and good morning everyone. Our Q1 2014 EBITDA came in at $28.9 million. That was up about 12.5% over the first quarter of '13. The EBITDA increase was driven by the timing of two shutdowns. We had one customer shutdown in the first quarter of '13, and as Keith mentioned, ROVA's annual maintenance shutdown last year was scheduled for the first quarter.

We did see EBITDA growth at some of our other operations, both Colstrip and Kemmerer got off to great starts for the year. However, they were offset somewhat by rail performance issues at the WRI mine.

Our Q1 '14 revenue came in at $180.2 million. That's an increase of about 11.6%. We posted 19.3% net loss in the first quarter of '14. And over $18 million of that net loss was driven by three acquisition financing items. We had $6 million of increased interest expense on our new notes. We had a $5 million fee on the completion of the bridge loan we secured, but didn't have to utilize. And we have $7 million of non-cash losses on the currency heads we used to lock in the Canadian consideration.

We locked in at a good exchange rate of $1.8, but we could have done little bit better with rates currently at sitting around a $1.10. Without those three items that resulted from the acquisition financing we would have improved up on our Q1 2013 results.

We did have a very good cash generation quarter in the first quarter of '14. Our overall cash balance remained flat at $62 million. However, we placed almost $17 million of cash into the share escrow account, and that represented accrued interest on the new notes as well as some DOPs.

We are maintaining our 2014 guidance for the Europe business. That is 25-28 million tons for the year, $114 million to $122 million EDITDA and $26 million to $29 million of CapEx.

The Canadian guidance for the remainder of 2014, 13 million tons to 16 million tons, $52 million to $62 million of EBITDA, and we converted that to U.S. dollars and $25 million to $30 million of CapEx. So that leaves us on a combined basis at 38 million tons to 44 million tons for the year, $156 million to $184 million of EBITDA, and somewhere in the ballpark of $51 million to $59 million of CapEx for 2014.

Just to reiterate in the quarterly timing, Sherritt operations are primarily cold weather driven. Seventy five percent of the Canadian operations production and EBITDA comes in the fourth and first quarter of the year with their first quarter actually being the strongest quarter of the year.

With the Canadian operations Q2 and Q3 traditionally being like quarters, our ROVA outage returning to its traditional Q2 timing, and our other typical U.S. customer outages which are scheduled for the second quarter, we will be looking at a pretty light second quarter with the bulk of our 2014 EBITDA generation coming in the third and fourth quarter of 2014.

With that, I'll hand it back over to Keith.

Keith Alessi

Thanks. As all of you know we announced on Christmas eve that were acquiring the Sherritt coal assets, and shortly thereafter we hit the street, we raised the money through the financing and then we started the clock ticking on a number of regulatory approval processes. We got through two weeks ago with the Canadian Competition Act. Just on Wednesday of this week we received the final regulatory approval through the course [with less] (ph) the structure of the deal and the documents. That started the clock ticking on a very complicated closing.

We expect the closing at this point to occur early in next week, hopefully as early as Monday, and it all goes well. You can imagine there is a lot of moving parts here. Reclamation bonds have to be released and new ones put on and insurance put in place, and all of the various parties for this transaction get all the documents that they need, they sort it out to make sure that it's a seamless transition.

I've been fortunate enough to spent a lot of time over the last four months up in Canada at the Edmonton office and in the mines. I've met all the customers. I've met all the employees, mining employees. I've met the represented workforce representative and our joint-venture partners up there. They are all very excited about this transaction as am I. It's been a very long process. It's going to turn out to be just about four months they have brought this thing under our wings.

As I look at the operations up there, there is no question that the operation has been put under a modest threat due to the transition from the perspective that people are looking to get going on a new direction yet they are still in the old company. And I am looking forward to that uncertainty being cleared up here shortly and us being able to transition the Sherritt business on to our platform and have those folks join our team.

We put some guidance in the press release this morning on the eight months, related to the eight months and a couple of days remaining in 2014, we are going to be taking the business over at a very slow period of time in the year for the folks at Sherritt for these assets. We are still seeing these assets generating in the range for the next 12 months is what we thought they would be doing when we think the original deals. There has certainly been a little bit of slippage on the currency side, but there are some concepts for that in terms of purchase price and whatnot, and we also have a little bit of a built in hedge in the Canadian business in terms of the export mine operates in Canadian dollars, they collect its sales in U.S. dollars.

You see as we laid out the numbers here in the press release, the number that's probably the one I have the least certainty about is the capital number right now. We put a range in there that looks pretty much like what we would expect a normal run rate to look. Thankfully they have not made large commitments for the back half of the year. Sherritt historically ran higher capital numbers than we run. But I think I am very comfortable with this range, and I would hope it to come in closer to the lower end of the CapEx range and the higher end. But once you get in there and start running it, we will be able to screw those numbers down tighter.

As Kevin mentioned, almost 75% of the EBITDA that these assets generate coming in Q1 and Q4, half of the EBITDA that will be generated during this fiscal year will come in that fourth quarter. So we will keep people updated as we move along. There are certainly some opportunities for efficiency. We will move rapidly to capture those, and are looking very much forward to the next several weeks as we bring this into the full.

With that, I'm going to open it up for questions from the group. And operator, please open up the lines.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from Matt Farwell, Imperial Capital. Please proceed with your question.

Matt Farwell - Imperial Capital

Hi, good morning guys. Congratulations on a good quarter.

Keith Alessi

Good morning.

Robert King

Thanks, Matt.

Matt Farwell - Imperial Capital

So, first question is on the guidance. Could you give us some idea of how the guidance for Sherritt and for the combined company sort of differs from the 235 and pro forma EBITDA that was disclosed as of 9/30/13? Can you give us an idea on what some of the changes are that you expect?

Keith Alessi

It really doesn't -- it doesn't really differ from it. If you would take 12 months starting the day we take over and tag that in and if you could slide all that back into this fiscal, it's very much right on where we said it was going to be. There is no material deviations on it.

Matt Farwell - Imperial Capital

Okay. Of the guidance for share, can you give us an idea of how that breaks out between Mountain and Prairie?

Keith Alessi

Yeah, the bulk -- I am just saying the bulk of it is Prairie. The Mountain operation for the year is still marginally cash flow positive, but not materially. So those numbers pretty much reflect the Prairie operation.

Matt Farwell - Imperial Capital

Do you expect Mountain to be EBITDA positive and perhaps cash flow positive as well?

Keith Alessi

It will be very close to a breakeven operation on both metrics I believe over first 12 months, yes.

Matt Farwell - Imperial Capital

Okay. And you have some impressive cash generation numbers that you apply -- you are putting 17 million into escrow and yet the cash remains the same, and you had a large cash interest payment during the first quarter. Is that just due to additional funds that were raised in the transaction or there are some benefits on the working capital side or some other cash generation that you can explain?

Kevin Paprzycki

That does not include any of the funds that we have raised, all the funds that's getting in escrow. So that $17 million we generated is really just due to operational performance and we did have the benefit of some good working capital adjustments on the first quarter.

Matt Farwell - Imperial Capital

Okay. Is that some sort of sustainable number or is that -- it's just something that we can benefit from this quarter?

Kevin Paprzycki

Yeah, we did have one $7 million free up of a performance bond we posted that was also in that $17 million. So that's a one-timer. I would say that probably at least half of that number is probably from working capital that I wouldn't run rate on a go forward basis.

Matt Farwell - Imperial Capital

The interest that you will eventually pay on the money in escrow, is that basically in this $17 million number, or is that coming our -- how does that -- can you give me some idea how the accounting works there?

Kevin Paprzycki

The $17 million that we put in represented the accrued interest for February through April. And so we were prepaying into the escrow account for those month's interest.

Matt Farwell - Imperial Capital

And you don't get any benefit for the operations from share during the time before the transaction closed?

Kevin Paprzycki

You got it.

Matt Farwell - Imperial Capital

Okay. And then ROVA, it looks like you had a pretty good quarter, is it fair to say that that asset will outperform what it did last year despite some of the contract restructuring, the strong quarter and (indiscernible)?

Kevin Paprzycki

Yes, the timing. Really when you look at the first quarter, it's just the timing of the maintenance outage. Last year the customer requested that the maintenance outage be in March, and this year it's in the April-May timeframe. So year-on-year it's really just the timing of the outage is what you are seeing. Although the operation (indiscernible) the operation got up to a pretty decent start under the new restructured contracts.

Matt Farwell - Imperial Capital

Okay. Thanks for answering my questions. And I will hop into queue.

Operator

Our next question comes from Lucas Pipes with Brean Capital. Please proceed with your question.

Derek Fernandes - Brean Capital

Good morning, gentlemen. This is actually Derek Fernandes for Lucas this morning.

Keith Alessi

Okay.

Derek Fernandes - Brean Capital

Just to start, unfortunately I had to jump in a little bit after your opened. And I believe you said that the rail issues at Absaloka in particular were mostly cleared up. I guess I would ask if this would have any residual impact into Q2, and if Rosebud may also be similarly impacted?

Robert King

Well, Rosebud is not impacted, because we don't do rail service out of Rosebud. That's totally a mine-mouth operation. And as we see things unfolding right now, it appears that railroad issues are resolved with regard to what it is that we need for the Absaloka mine and we would not expect -- we are not expecting additional impacts going forward at this point in time. We have been running pretty well for two or three weeks now. And we see no reason that that shouldn't continue.

Derek Fernandes - Brean Capital

That's just -- very good. And then a little bit on the modeling of the EBITDA breakout. The Q2 being slightly about 7% according to your estimates greater than Q3. That's discounting nearly all of April due to you are not having the asset over the month, right?

Keith Alessi

You are referring to the Canadian guidance at this point?

Derek Fernandes - Brean Capital

Excuse me. Yes, for Sherritt.

Keith Alessi

Yeah, we normally have two months of a quarter and then Q3 is the lightest quarter for Sherritt. They only historically put up about 10% of their annual EBITDA on that quarter.

Derek Fernandes - Brean Capital

Right.

Keith Alessi

So they are down on maintenance and whatnot, then they come ramping up for the Q4 when things started getting cold up there.

Derek Fernandes - Brean Capital

Of course, and then you did provide a little bit of color in terms of Q1 being pretty meaningfully stronger than Q4. That's simply with regards to the weather impact over the quarter where we can more or less model that out in terms of how the forecast is going to be for cooler -- for 18 degree days in Q1 versus Q4?

Keith Alessi

Yeah. And keep in mind also that April which is -- Q2 month is also a very large EBITDA generator for Sherritt. They have probably end up generating as much in April, we will get in Q3. So it's not just Q1. You got Q1, of course the really strong first month of Q2 that are behind us before we buy it. So, as we look out over the horizon we tag those on to the end of the eight months that own it. And that's why we are very comfortable saying that the things are still guiding into the range that we thought they would be in.

Derek Fernandes - Brean Capital

Very good. Thank you. I'll jump back into the queue.

Operator

Our next question comes from Tim O'Brien with DG Capital. Please proceed with your question.

Tim O'Brien - DG Capital

Hi, guys. Good morning. Just a couple of questions, in terms of the rail disruptions, can you help quantify for us in tons of revenue, sort of the impact there during the quarter?

Kevin Paprzycki

I would guess probably somewhere upwards $3 million impact just because of interrupted deliveries due to the rail.

Tim O'Brien - DG Capital

Okay.

Keith Alessi

Some of that we will get back. We had a day in April where we had five trains get loaded, which is substantially higher than what we normally see, so some of that will shift a little bit in Q2, but some of that probably we don't get back. And that's why we have always talked about the range of outcomes, one operation will be up a little, one will be down a little bit, but that's just the nature of the coal business.

Tim O'Brien - DG Capital

Understood. Okay. And then just to confirm on the U.S. business for guidance for this year, did you say its 114 or 122, and is that comparing to previous guidance of 112 to 119?

Kevin Paprzycki

Yeah. It's actually 112 to 120 is the guidance range that I think we published at year end.

Tim O'Brien - DG Capital

Okay.

Kevin Paprzycki

That's the range we are still operating in.

Tim O'Brien - DG Capital

Okay. And then that doesn't include the potential tax credit which is right now pending in legislation, is that right?

Keith Alessi

We think that there is a good chance that we will pick up a little bit of that on the back half of the year. Within the legislation is a retroact of the January 1 proposal. We don't know that we would be able to monetize the January 1 through whatever date they approve this with. We would have to work with whatever party we would monetize with to determine whether you could go back and capture that. However, even if we didn't capture the monetization on the front half of the year, we would get the credits and we would ultimately use them, and they would ultimately shelter our tax liabilities going forward.

What impacts our EBITDA calculation is, if we can enter into a monetization transaction; at this point I wouldn't think that we would be able to do that until at least half way through the year. So, no, there is no material impact of Indian tax credit in our numbers at this point well in our guidance range. We are hopeful that we will pick some up, but if we do pick it up then probably it will only be about half a year.

Tim O'Brien - DG Capital

Okay. Do you have any sense on timing there with all that legislation?

Keith Alessi

Anybody can tell us what goes in Washington D.C. I would just like to know. Now, we have no idea. All we do know is that it's in legislation; it seems to have pretty widespread support. We've got a whole bunch of really good folks supporting it, and who knows, how it will all work out at the end of the day.

Tim O'Brien - DG Capital

Okay, understood, guys. Thanks a lot.

Operator

Our next question comes from Brian Taddeo with R.W. Baird. Please proceed with your question.

Brian Taddeo - R.W. Baird

Good morning. Derek touched on most my questions. I just wanted to get a general update on a couple of things. First, any update on Beulah, and what's going on with the situation there? Is that still basically looking that contract -- looking to go away over the short-term? And then just tell us also if there is any update on -- any change to their -- their plan to convert that 30 unit natural gas at all?

Keith Alessi

Based on what we have previously said, there is no changes to that to either of them. We are still expecting Beulah's contract with Coyote Station to go down in after the first quarter of 2016. And it looks like based on the latest communications from Pacific Corp that the conversion of unit 3 could be out in the 2018 timeframe versus the originally communicated 2016 timeframe.

Brian Taddeo - R.W. Baird

Got you. Okay. And there is just one more follow up on the rail issues. Can you just add a little more color, how much of that was weather-related versus more structural issues with more (indiscernible) shifted across the rails? Was it purely weather, or was there more just the traffic in general causing the hiccups?

Keith Alessi

I think you would have to ask the railroad there specifically, because we don't exactly know how their system operates. Weather, of course based on the winter we had here had a tremendous impact, but I think it -- we believed it had a greater than normal impact because the system itself is stressed based on additional demand on the resources that railroad has in place. And obviously the oil boom in North Dakota is a component of that.

Brian Taddeo - R.W. Baird

Okay, thank you very much. I appreciate it.

Operator

We have a follow-up question from Lucas Pipes with Brean Capital. Please proceed with your question.

Derek Fernandes - Brean Capital

Hi, good morning again, gentlemen. This is Derek. I just wanted to follow up with the ROVA outage. There is nothing unusual expected there as you put it in the April-May timeframe shift. There is no extended period or any difficulty like that?

Robert King

No, and in fact this maintenance outage is planned to be more of the many outage compared to what we would normally do. We'll be -- it's scaled back relative to previous.

Keith Alessi

But keep in mind we've entered into a new arrangement under the ROVA agreements in the plant. It's no longer a base load plant, per se. We've entered into a number of financial arrangements to make that thing work. So it's not going to be total apples-to-apples, but it's performing where we expect it to be, and it's performing where we guided it to be.

Derek Fernandes - Brean Capital

Okay, very good. And then just one final slight clarification, in the wording of the release, it was stated that up to 75% of the Sherritt EBITDA was realized in Q4 and Q1. Is that still hard up to or is that more or less a run rate we can consider moving forward?

Keith Alessi

That's in their historical -- we have an only asset, I'm little reluctant to get to any greater level refinement than that, and certainly you mentioned the cold weather days and degree days and all that good stuff, that certainly impacts. But their business is very similar to ours in terms of -- there is going to be natural fluctuations depending on weather, and whatnot. Their base load plants are always running hard in the winter. They had one plant this year that is offline during the winter months that put in carbon sequestration technology on it. It's supposed to be up here in June or July. That will help out next year perhaps in those quarters. But I think if it is assumed that number in that range and that wouldn't be too far off, some of it slips in the Q2 or in the Q3.

We don't tend to look at our business so much on a quarterly basis. The reason we probably made a much more of a big deal about it today than normal is because we do have a lot of new folks that are following us, and we just want to make certain people understand it's not a simple matter divided by four. And that's why we started guiding people to where we are, so they can better understand how we are looking at the business.

Derek Fernandes - Brean Capital

Right, right, absolutely. Okay. Well, I guess just if I may, just for one final question. I would ask if you put any additional thought into a particular partnership structure given the acquisition being made now.

Keith Alessi

We're always looking at ways in which to optimize value, and if there are in fact other ways to optimize value to the structure, we are open to it. We clearly had our hands full just trying to get this one documented done through the regulators, and now we start executing. But that's certainly funds of mine for us at all times.

Derek Fernandes - Brean Capital

Excellent, excellent, and congratulations again on finally completing such a major transaction for the company.

Keith Alessi

Thank you.

Operator

Our next question comes from Matt Farwell, Imperial Capital. Please proceed with your question.

Matt Farwell - Imperial Capital

Hey, guys. No conference call would be completed without a discussion of M&A, I know you dropped everything by (indiscernible) I think you had mentioned there up to 20 potential candidates. At what point would you begin to revisit this pipeline?

Keith Alessi

The pipeline isn't a pipeline in the sense that they're all in the pipeline. There are people who own those assets that are at various stages of assessing whether they want to own them long-term or not. So, largely M&A activity is driven by the opportunity. There are certainly two properties floating around in the marketplace right now that may or may not have some interest, but I don't think that they're eminent in terms of anything that's going to happen over the next quarter or two. The process tends to take six to nine months where everybody get into due diligence and whatnot.

There is certainly some out there. But we're always looking, and I would be very hesitant to indicate that the situation has been different than it always been in terms of level of activity.

Matt Farwell - Imperial Capital

When you look at your debt and high coupon, which you still you would look to revisit that around an additional, another transaction or would you -- once this becomes callable, will you look to lower your overall cash interest independently?

Keith Alessi

I think that we will be studying that issue throughout the summer. And it's clearly we've talked quite a bit about and talked about the fact that we feel it was appropriate to have that conversation and whether that should occur before the call date or not would be depending up on some of the conversations we have with our bankers and our bondholders.

We are not allowed to call them out before February of 2015, but there is clearly ways of doing that, but it will involve conversations, and we will be looking to our financial advisors to help guide us through that evaluation.

Matt Farwell - Imperial Capital

That's good. And then one last thing, regarding the comment about partnership structures, at this point where do you -- how long do you project the NOLs will last, did you acquire any NOLs through the transactions?

Keith Alessi

We did acquire NOLs required, I think it's somewhere in the ballpark of $70 million Canadian NOLs, which will help shelter the Canadian taxes. I think our model indicated that if we hit our projections exactly, we are sheltered from income taxes somewhere between I think five and seven years, and so obviously if we outperform our model, it would be shorter than that, but I think there is enough Canadian NOLs, U.S. NOLs and Indian Coal Tax Credits, but we possess on our own to shelter for that five to seven year period.

Matt Farwell - Imperial Capital

Got it, thanks.

Keith Alessi

Thanks.

Operator

At this time, there are no further questions in queue. At this time, I'll like to turn the call back over to Mr. Keith Alessi for closing comments.

Keith Alessi

Well, thanks everybody for joining us this morning. We will be certainly releasing something on day that we execute the deal close, so you'll know that everything is finished up. And we'll look forward to chatting with everybody about 90 days from now.

Operator

This concludes today's investor conference call. If you'll like to access this call for digital replay, you may dial 18776606853; conference ID number, 13580152. Thank you. And have a great day.

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