Acquisition of Marshall Mine

9 Months Ended

Sep. 30, 2021

Business Combination and Asset Acquisition [Abstract]

Concurrently with the execution of the Supply Agreement, on September 30, 2020 (the "Acquisition Date"), the Company entered into an agreement to purchase from Cabot 100% of the membership interests in Marshall Mine, LLC (the "Marshall Mine Purchase Agreement") for a nominal cash purchase price. Marshall Mine, LLC owns a lignite mine located outside of Marshall, Texas (the "Marshall Mine"). The Company concluded that the Marshall Mine did not have any remaining economic reserves and independently determined to immediately commence activities to shutter it. On the Acquisition Date, the Company entered into a reclamation contract (the "Reclamation Contract") with a third party that provided a capped cost agreement, subject to certain contingencies, in the amount of approximately $19.7 million plus an obligation to pay certain direct costs estimated to be $3.6 million (collectively, the "Reclamation Costs") over the estimated reclamation period of 10 years (the "Reclamation Period"). Under the terms of the Supply Agreement, Cabot is obligated to reimburse the Company for $10.2 million of Reclamation Costs (the "Reclamation Reimbursements"), which are payable semi-annually over 13 years and inclusive of interest. In the event that Cabot has a change in control as described in the Supply Agreement, all outstanding balances of the Reclamation Reimbursements shall be due and payable in full. See further discussion of the Reclamation Costs and Reclamation Reimbursements in Note 4.

The Marshall Mine Purchase Agreement included the acquisition of certain assets that will be consumed and the assumption of certain liabilities that are to be paid in reclamation of the Marshall Mine in addition to the incurrence of an obligation for the Reclamation Costs. The Company accounted for the Marshall Mine Purchase Agreement as an asset acquisition.

As the Marshall Mine Purchase Agreement represents a transaction with a customer of net assets acquired and liabilities assumed from Cabot, the Company accounted for the excess of the fair value of liabilities assumed over assets acquired as upfront consideration transferred to a customer, Cabot (the "Upfront Customer Consideration"). The amount of the Upfront Customer Consideration was also recognized net of an additional asset recognized in the Marshall Mine Acquisition, which was comprised of a receivable from Cabot (the "Cabot Receivable") for the Reclamation Reimbursements. The Cabot Receivable is further discussed in Note 4.

The total Upfront Customer Consideration is being amortized as a reduction to revenues on a straight-line basis over the expected 15-year contractual period of the Supply Agreement.

As part of the Marshall Mine Purchase Agreement, the Company assumed liabilities, whose fair value exceeded the fair value of assets acquired. A summary of the net assets acquired and liabilities assumed and the additional assets recorded in the Marshall Mine Purchase Agreement as of the Acquisition Date are shown in the table below. The Company completed additional analysis of the assets acquired and liabilities assumed and recorded adjustments as of December 31, 2020 as shown in the table below.


(in thousands)	As Originally Reported		Adjustments		As Adjusted
Assets acquired:
Receivables	$	—	$	513	$	513
Property, plant and equipment	3,863		—		3,863
Spare parts	100		—		100

Liabilities assumed:
Accounts payable and accrued expenses	(673)		160		(513)
Asset retirement obligation	(21,328)		—		(21,328)
Net assets acquired and liabilities assumed from Marshall Mine acquisition	(18,038)		673		(17,365)
Cabot Receivable	9,749		—		9,749
Upfront Customer Consideration	$	8,289	$	(673)	$	7,616

The Company also evaluated Marshall Mine, LLC as a potential variable interest entity ("VIE"), and determined that it was a VIE and the Company was its primary beneficiary. Therefore, the Company consolidates Marshall Mine, LLC's assets and liabilities in its consolidated financial statements.