Arch Coal writes DKRW Advanced Fuels’ coal gasification project as a $57.7 million loss

2014-04-23T08:00:00Z Arch Coal writes DKRW Advanced Fuels’ coal gasification project as a $57.7 million lossBy BENJAMIN STORROW Casper Star-Tribune The Billings Gazette

CASPER, Wyo. -- DKRW Advanced Fuels' proposed $2 billion coal gasification plant near Medicine Bow lost $62 million during the last seven years, financial filings show with federal regulators show, prompting the Houston firm’s financial partner to write off its remaining investment in the venture late last year.

Arch Coal, Inc. invested $25 million in the planned plant in 2006 in return for a 24 percent stake in the company. The St. Louis-based firm planned to provide coal to the facility, which would then be turned into liquid petroleum products.

But the project struggled through permitting and funding delays, losing money every year since 2007.

The losses started at $400,000 in 2006, according to a review of Arch's financial filings with the U.S. Securities and Exchange Commission by Taxpayers for Common Sense, a Washington, D.C.-based watchdog group.

They grew to almost $6.7 million the next year and never dropped below $6.3 million, Taxpayers reported. The biggest loss came in 2012 when the venture lost $17.5 million.

Arch loaned DKRW a total of $44 million between 2006 and 2013, none of which has been paid back, while watching its equity in the company fall to $13.7 million.

Late last year the coal company signaled it had all but given up on the project after Sinopec Engineering Group, a Chinese firm hired to build the facility, did not start work on time last summer. DKRW later terminated its contract with Sinopec.

In its 2013 annual report to the U.S. Securities and Exchange Commission, Arch listed its total $57.7 million investment in the project -- $44 million in outstanding debts and $13.7 million in remaining equity -- as an impairment loss. The term is used in accounting to signal a company does not expect to recover its investment in a venture.

“Given the absence of a specific path forward and timeline for the project, we concluded that – in keeping with (Generally Accepted Accounting Principles) – writing down the value during the fourth quarter of 2013 was the appropriate course of action,” Arch spokeswoman Kim Link wrote Tuesday in an email to the Star-Tribune. “DKRW continues to seek financing for the project, which is an essential next step in order to move forward.”

DKRW did not return requests for comment on this story.

The company has pursued federal funding to build the plant. The Department of Energy tentatively approved DKRW’s request for a $1.75 billion federal loan guarantee in 2009. The federal approval was contingent on the project passing an environmental review. That review stalled after the Energy Department’s lending program attracted congressional scrutiny for its $535 million loan to the now bankrupt California solar-panel maker Solyndra. But in recent months DKRW officials said they were in renewed talks over the company’s loan application.

Arch’s write-off raises serious concerns over whether federal funding should be used to finance the project, said Autumn Hanna, a senior project manager at Taxpayers for Common Sense, a Washington, D.C.-based watchdog group. The group issued a report last week detailing Arch’s write-off of the project.

“It just looks to me that there is nothing that they can turn it around,” Hanna said. “It is just year after year of losses, and even Arch Coal recognizes that.”

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