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Sunoco Reaches Settlement with ArcelorMittal on Coke Pricing Litigation

02/01/2011 - Sunoco says it will move forward with the planned separation of SunCoke Energy now that it has reached an agreement with ArcelorMittal resolving the lawsuit over coke pricing for the Jewell facility.

Sunoco, Inc. is one step closer to its planned separation of SunCoke Energy now that it has reached an agreement with ArcelorMittal resolving the lawsuit over coke pricing for the Jewell facility.
 
The settlement agreement, which is effective retroactively to Jan. 1, 2011, includes the following terms:
 
·         Renegotiation of the Jewell coke contract, including elimination of the Jewell coal cost multiplier and an increase in fees. Pricing will be based on 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, providing SunCoke a guaranteed outlet through 2020. Both contracts were previously structured to convert to a basis of ArcelorMittal’s U.S. requirements effective October 2012.
 
·         No compensatory damages.
 
Based on the guidance assumptions previously provided, the company estimates this settlement for 2012 will reduce EBITDA by approximately $60 million.
 
“The settlement is an important step in resolving a dispute with our largest customer,” said Frederick A. “Fritz” Henderson, who will serve as Chairman and CEO of SunCoke Energy upon its separation from Sunoco. “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 Henderson. “We also continue to pursue growth opportunities in the U.S. and abroad.”
 
SunCoke Energy, which is currently part of Sunoco, uses its technology and proprietary processes to make high-quality metallurgical-grade coke for major steel manufacturers in the United States and Brazil. SunCoke has been a market leader in designing, building, owning and operating plants that have far less impact on the environment than traditional coke making plants. SunCoke's plants are configured to efficiently produce electricity and/or high-grade industrial steam from heat recovered from its coking process. The company's facilities in the U.S. -- located in Virginia, Indiana, Ohio and Illinois -- have the capacity to manufacture approximately 3.67 million tons of metallurgical coke annually. The company is also building a plant in Middletown, Ohio, that is slated to produce 550,000 tons of coke and 46 megawatts of electricity when fully operational in the second half of 2011.
 
SunCoke is the operator of, and has an equity interest in, a 1.7 million tons-per-year coke making facility in Vitória, Brazil. The company has been mining the type of coals used in manufacturing coke for more than four decades. SunCoke previously announced plans to increase production from its metallurgical coal mines by approximately 45% to approximately 1.75 million tons annually.
 
Sunoco is a leading transportation fuel provider, with operations located primarily in the East Coast and Midwest regions of the United States.