Subsequent Events

9 Months Ended

Sep. 30, 2012

Subsequent Event [Line Items]

Subsequent Events [Text Block]

Subsequent Events

On October 10, 2012, Coyote Creek Mining Company, LLC (“CCMC”), an indirect subsidiary of the Company, entered into a Lignite Sales Agreement (the “LSA”) with Otter Tail Power Company (“OTP”), a wholly owned subsidiary of Otter Tail Corporation, and with OTP’s co-owners in the Coyote Station baseload generation plant, Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc., Northern Municipal Power Agency and NorthWestern Corporation. Under the LSA, CCMC will develop a lignite mine in Mercer County, North Dakota and deliver to the Coyote Station co-owners, as an exclusive supplier, the annual fuel requirements of the Coyote Station plant (expected to be approximately 2.5 million tons annually starting in 2016). The term of the LSA consists of two periods: (i) the development period, which is from October 10, 2012 until on or around May 5, 2016, and (ii) the production period, which is from the last day of the development period until December 31, 2040. The production period is subject to automatic 5-year extensions unless either party gives notice of its desire not to extend the LSA or the lignite at the mine is exhausted. The price per ton under the LSA will reflect the cost of production, along with an agreed profit and capital charge. In addition, the LSA provides for certain early termination events following which the Coyote Station co-owners must purchase the membership interests in CCMC. If the termination occurs in 2024 or later, NACoal is obligated to buy CCMC’s dragline and rolling stock as a condition to the sale of the membership interests in CCMC. NACoal provides a payment and performance guaranty of CCMC’s obligations in connection with the LSA.