Company: NC
Filing Date: 2025-11-05
Form Type: 10-Q
Source: 0000789933-25-000102
Chunk: 14

Company: NACCO INDUSTRIES INC
Filing Date: 2025-11-05
Form: 10-Q
Item: Part I, Item 1
Chunk 14
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 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 2025.In December 2023, MLMC received notice from its customer related to a boiler issue at the Red Hills Power Plant. While this issue has been resolved, it resulted in a reduction in customer demand which had a significant impact on our results of operations during 2024. We recognized income of $13.6 million in the third quarter of 2024 related to business interruption insurance recoveries to partially offset losses related to the boiler outage.The Sabine Mining Company (Sabine) operates the Sabine Mine in Texas. All production from Sabine was delivered to Southwestern Electric Power Company's (SWEPCO) Henry W. Pirkey Plant (the Pirkey Plant). SWEPCO is