Next Tuesday, SXCP and its parent company SXC will hold an investor day to discuss their plans to grow the business. Per CS, the most likely scenario is for SXC to drop down/sell the remaining portions of the coke plants that they dropped down to SXCP before the IPO. SXCP currently owns 35% of those plants, with SXC owning the rest. But it would seem SXCP could not afford the entire drop down now, so it will probably be done in stages over several years. Let's hope the market likes what they say.
I would have no way of knowing what moves NRP on a daily basis, or even on a short term basis. But ARLP/AHGP were up today, and even RNO, my new not-quite favorite was up nicely. So some coal names did OK, and NRP was one of them. Maybe no analysts mentioned them last night or today.
Have a good weekend. Me, I'm doing tax returns.
So if you don't want to pay the tax, or at least get it back from the IRS, you need to (1) apply for a TIN (taxpayer id number) from the IRS, which can be a headache in itself, (2) complete Form W-8BEN (not too hard), (3) submit the form to SXCP's transfer agent (your broker might be able to help here), and (4) maybe file a US tax return, you can get the money (or most of it, probably) back.
Or you can sell your SXCP and avoid investing in US partnerships.
BTW, Canada used to have this situation as well. If you're old enough to remember the old royalty trusts that did not pay Canadian income taxes (before BCE tried to go the royalty trust route and messed things up for everyone), those trusts also passed along their tax liability to their shareholders. And if a US person was a shareholder, the way that Revenue Canada got its piece was by having the trust withhold Canadian income taxes on distributions. It's been a few years, so I may have mangled the specifics, but hopefully you get the idea.
Hope this helped.
This is a common problem with US publicly-traded partnerships. I'm guessing you have invested in US stocks before, but not MLPs (MLP = Master Limited Partnership, = publicly traded partnership). US partnerships don't pay income taxes; instead, their taxable income is passed along to the partner/owner tax returns, and they pay the tax. This works OK as long as the owners are US individuals or business entities because the IRS gets it tax, just at a different level. But when the owner is not subject to US income taxes, like yourself, the rules get nasty.
In SXCP's final prospectus, which you had absolutely no reason to read, is the following convoluted language. Feel free to read it, but basically it says that when SXCP pays a distribution to an NRA (that's you, see below), it will withhold US taxes at the highest marginal rate (39.6%) on all of the distribution. There is a way around this withhodling, apparently, but unless the money is significant, the better choice for you is to avoid investing in partnerships. Anyway, the prospectus says "Non-resident aliens (sorry for the wording, I don’t write the law, but NRAs simply refer to individuals that are neither US citizens nor US residents) that own units will be considered to be engaged in business in the US because of their ownership of our units. Consequently, they will be required to file federal tax returns to report their share of our income, gain, loss or deduction and pay federal income tax at regular rates on their share of our net income or gain. Moreover, under rules applicable to publicly-traded partnerships, distributions to non-U.S. unitholders are subject to withholding at the highest applicable effective tax rate. Each non-U.S. unitholder must obtain a taxpayer identification number from the IRS and submit that number to our transfer agent on a Form W-8BEN or applicable substitute form in order to obtain credit for these withholding taxes."
Sorry, too long.
Kind of useless information - PVR recently filed a proxy in support of its merger with RGP. In the proxy, PVR describes the history of the merger negotiations. In the history, PVR says that it negotiated a sale of its coal reserves/royalty business with 3 potential buyer between December 2012 and August 2013, but all 3 potential buyers came up with a price that was too low for PVR to accept.
Someone on Investor Village says that 2 of the 3 potential buyers were NRP and KMP, but there's nothing in the PVR proxy to identify anyone. NRP would have been an obvious buyer, and KMP also owns coal reserves, so maybe that's the connection the IV poster was making.
Anyway, I assume NRP did consider making a bid, but to its credit, they wouldn't overpay and no deal happened. I suspect NRP is really happy right now that they don't have more coal reserves to worry about.
But I also suspect that the ETE/RGP group will be marketing the coal royalty business fairly soon.
Never. The company has stopped paying dividends.
Also, the news about Jessica Simpson losing all her post-pregnancy weight yesterday by using WTW hasn't helped the stock today, certainly.
$ 27.5 MM fine and agrees to spend $ 200 MM to clean up water flowing from its mines. Activists say it's not enough, that all the spending in the world won't clean up the water.
FWIW. Just another problem for NRP's second largest lessee.
On the other hand, OXF has done what you thought they should do. They idled their Illinois Basin mine (due to the loss of contract to sell its coal), so that it's IB coal dropped from 2.2 MM tons in 2012 to only 300,000 tons this year and zero at the present time. They also said they were idling 2 mines in Ohio, which I guess in NAPP.
I can't see OXF surviving, which is also what you've posted about miners in general. OXF's partners capital is now negative, and they still owe a lot of debt, which is why their interest expense skyrocketed.
CLMT paid $ 53.6 million for Bel Ray, not counting $ 11.9 MM of assumed debt. I have absolutely no idea why they were so secretive about the purchase price, but it's shown in the financial statement footnotes in the 10-K. They still aren't disclosing Bel Ray's sales; they have combined them with the San Antonio refinery acquisition, but I assume we could go back to the San Antonio acquisition disclosure and make a guess about Bel Ray's sales.
We'll see what RNO thinks it can do in 2014 later this month, but I'm not hopeful.
RNO needs casf flow of $ 30.5 million to fund the current distribution on the common and GP units, In addition, it needs another $ 22 million to reinstate the distribution on the subordinated units, for a total of almost $ 53 million.
RNO has contracted for 800,000 tons per year of production at the new Pennyrile mine when it opens around mid-year, so it should pick up half that volume this year. It's looking to sell additional production; we'll see what they say about their success when they release projections, but they haven't been able to contract any additional amounts for the last few quarters.
As an uninformed guess, I took the 2013 coal operations (1) knocked down the CAPP activity a bit for the slow downs they announced last year, (2) increased the loss from the Eastern met JV based on what they said on the call about pricing, (3) threw in 500,000 tons of IB coal from Pennyrile, (4) included the $ 8.4 million distribution from the oil & gas ventire that they received in Q1, and (5) eliminated all interest expense after Q1. While RNO may cover the $ 53 MM DCF needs in 2014 because of the oil & gas sale, I can't see them covering the necessary DCF on a continuing basis.
One upside is that in 2013 RNO was still investing in the oil & gas JV, and that will stop. Also, they've been spending on the new Pennyrile mine, and that should slow down when it opens. But $ 53 million is a big target for such a small company.
I just bought a few shares last week (as usual, before I thought things through) and it seems I was too early. I can't see RNO cutting the common unit distribution assuming the Utica sale goes through, so I don't see a lot of downside, but I don't see any upside either.
FWIW. Maybe they will say something positive when they release 2014 projections.
I suspect they would issue debt as well. We'll know more about their planned expansion/drop downs from SXP at the investor meeting later this month, but I suspect they're looking at a fairly large drop down.
I wasn't criticizing NRP for not telling investors about the earn-out; I knew they had told people. Also, whether they recorded the liability for the earn-out during 2013's quarters or not is pretty meaningless - it's just a balance sheet entry, with no income statement impact. I just thought it was funny that during all the OCIW restructuring that was done last summer, no one (including Anadarko, apparently) thought about the possible collateral damage that might occur.
Plus, if NRP has to pay the money sooner than expected, it puts a dent in its ability to repay debt this year or make new investments. Not fatal, certainly, but a dent.
And BTW, I can't find that NRP ever filed the OCIW purchase agreement with the SEC so I have no idea what triggered the earn-out or its acceleration.
If you want to get really depressed, just look at the legal exposure section of the 10-K. Just going from 2012 to 2013, things got a lot worse. On a related matter, look at Current Results/Market Outlook. Current results (2013 coal) were really bad, and the outlook is much worse than it was a year ago. They don't expect met coal prices to recover in 2014, and while the cold winter has caused utilities to work down their inventories, they don't see much recovery for CAPP coal.
NRP's royalties from Cline, the biggest lessee, increased $ 6 MM in 2013 (that's the amount earned in 2013 based on Cline's production), but the minimum royalties paid by Cline declined $ 8 MM (that's the part that is recorded on the balance sheet until coal production occurs). NRP only discloses production at 3 properties leased to Cline - Williamson, Macoupin and Hillsboro/Deer Run, all in the IB. There must be other properties leased to Cline affiliates, but production is too small to disclose. Anyway, at the 3 IB mines, 2013 production declined at both Williamson and Macoupin, and it increased at Deer Run only because Deer Run was only in operation for part of 2012. Macoupin seems to have shut down part of its mine, not a good sign.
I don't see any complete shut downs of mines in 2013. All of the mines that were separately disclosed in 2012 still have similar amounts of production in 2013, with 2 exceptions. 1 very small mine (200K tons) disappeared, and Lynch (leased to ANR) dropped from 3 MM tons to 1.4 MM tons. Maybe that's part of the ANR move I mentioned in an earlier post.
1 more post to go.
Totally different topic. In 2012 ANR generated $ 81 MM of royalties for NRP. In 2013, this dropped to $ 55 MM, for a drop of about 33%. The 10-K says (this is new disclosure in 2013) that lessees move on and off our properties over the course of any given year in accordance with their mine plans. Our revenues are reduced when a lessee moves to reserves adjacent to our properties that are now owned by us. These reductions are generally offset by other lessees moving their operations back onto our properties, but in Q4 013, NRP experienced several high-volume lessees moving their operations off NRP properties to adjacent properties not owned by NRP. This apparently happened with respect to ANR.
More importantly, NRP expects that the volume of coal produced by lessees moving off NRP's properties will exceed the volume of coal produced by lessees moving back onto NRP's properties. "These reduced volumes, along with continued depressed coal prices, are expected to result in a significant decrease in our coal royalty revenues during 2014 as compared to prior years."
It's always helpful to line up the current 10-K and the prior year 10-K to see changes in disclosures. A lot of things pop up, and I will probably make several posts to include the most interesting ones.
One that I thought was key - when NRP bought the interest in OCIW from Anadarko, it paid $ 292 MM in cash, plus it agreed to pay as much as another $ 50 MM if OCIW performed at certain levels. Thru Q3, NRP did not recognize any liability for any portion of the $ 50 MM on its balance sheet. Oops. In Q4, it recognized a liability, most of it long-term, for $ 15 MM that it thinks it owes Anadarko based on OCIW's performance.
Then, the 10-K states that as a result of OCIW's reorganization in July 2013, Anadarko has orally indicated that it thinks NRP owes it the full $ 50 MM, and NOW. Anadarko only raised this issue in February 2014 (apparently no one saw this coming on either side), and it may make a formal claim for the money in the near future. NRP does not think Anadarko is entitled to the money, but will engage in discussions to resolve the matter.
I'll have to look at the purchase agreement to see what the issue is, but anyway, NRP woke up to the $ 15 MM it thinks it owes Anadarko so far (if OCIW continues to perform well, it will owe more (maybe the full $ 50 MM), just not right now.
My comment - I have posted many times on this board that NRP's accounting for the OCIW investment is misleading - all the outlays are ignored in computing DCF, but any cash coming from OCIW, including money from borrowings, is considered DCF. NRP points out that even if has to pay the $ 50 MM now, it won't affect DCF.
SXCP registered 14 MM units for possible sale by SXCP, plus 18 MM units for possible sale by SXP. The 18 MM units being registered for SXP represent 100% of its ownership (excluding IDRs), so I doubt it will sell all of the units.
This is not an overnight sale. The units are being registered for later sales (which will probably be overnight sales, considering the number of units being registered).
The units being registered for SXP are puzzling (to me, at least), but SXCP has said it was interested in getting some of SXP's other coking facilities, and this requires cash. So SXCP's intention to sell units is not puzzling at all. I would think something will happen fairly soon. I think March is the end of SXP's no-action period after its spin. There's an investor day coming up (March 11, I think), and I wouldn't be surprised to hear some specific growth plans then.