Company: NC
Filing Date: 2025-11-05
Form Type: 10-Q
Source: 0000789933-25-000102
Chunk: 53

Company: NACCO INDUSTRIES INC
Filing Date: 2025-11-05
Form: 10-Q
Item: Part I, Item 8
Chunk 53
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Utility Coal Mining Segment: The Utility Coal Mining segment operates surface coal mines under exclusive, long-term contracts to supply 100% of the fuel requirements for adjacent power plants and a synfuels plant. Each mine is fully integrated with the operation of these facilities.During the three and nine months ended September 30, 2025, the Utility Coal Mining segment's operating coal mines were: The Coteau Properties Company (Coteau), Coyote Creek Mining Company, LLC (Coyote Creek), The Falkirk Mining Company (Falkirk) and Mississippi Lignite Mining Company (MLMC). Coteau, Falkirk and Coyote Creek are in North Dakota and MLMC is in Mississippi. Each of these mines produce lignite coal. While MLMC’s coal supply contract contains a take or pay provision,  all other coal supply contracts are requirements contracts. Certain coal supply contracts can be terminated early, which would result in a reduction to future earnings.The MLMC contract is the only coal supply contract in which we are responsible for all operating costs, capital requirements and final mine reclamation; therefore, MLMC is consolidated within our financial statements. MLMC sells coal to its customer at a contractually agreed-upon price which adjusts monthly, primarily based on changes in the level of established indices which reflect general U.S. inflation rates and includes adjustments for coal quality and certain reimbursable costs. Profitability at MLMC is affected by customer demand for coal, changes in the contractually determined sales price and actual costs incurred. MLMC's customer operates the Red Hills Power Plant, which supplies electricity to the Tennessee Valley Authority (TVA) under a long-term power purchase agreement. MLMC’s contract with its customer runs through April 1, 2032. Current mine area reserves are sufficient to meet contractual requirements through the 2032 contract term. TVA’s power portfolio includes coal, nuclear, hydroelectric, natural gas and renewables. The decision regarding which power plants to dispatch is determined by TVA. As a significant portion of MLMC’s costs are fixed, reduction in dispatch and/or reduced mechanical availability of the Red Hills Power Plant can increase per ton costs and materially affect operating results at MLMC. Conversely, periods of higher dispatch can improve results. The Red Hills Power Plant operated at below full baseload capacity 

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and experienced periods of reduced mechanical availability during 2024 and 2025. These factors increased per ton operating costs which adversely affected operating results in both 2024 and 202