Item 1A Risk Factors
−Removed: During the quarter ended June 30, 2022, there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, except as follows:
+Added: During the quarter ended September 30, 2022, there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, except as follows:
The value of our investment in a private company involved in the ethanol industry could decline, could be illiquid and could be volatile in terms of value and returns, which could adversely affect our financial condition and results of operations.
−Removed: As of June 30, 2022, we hold a $17.8 million investment in a private company involved in the ethanol industry.
+Added: As of September 30, 2022, we held a $20.0 million investment in Midwest AgEnergy, a North Dakota-based ethanol business.
Financial returns on ethanol investments are highly dependent on commodity prices, which are subject to significant volatility, uncertainty and regional supply shortages.
−Removed: The $17.8 million dollar valuation for this investment is based, in part, on an assumption that the private company will implement carbon capture and storage to capture carbon dioxide generated in the ethanol production process.
+Added: The valuation for this investment is based, in part, on an assumption that the private company will implement carbon capture and storage to capture carbon dioxide generated in the ethanol production process.
This process increases the value of the ethanol produced by the private company.
Should this capture process be delayed or not implemented, the value of this investment may be impaired.
−Removed: This investment is non-marketable and we may not be able to achieve a return on our investment in a timely manner, if at all.
−Removed: The private company's operating agreement restricts the Company's ability to transfer the membership units, resulting in a liquidity discount.
−Removed: Since there is no active market for the exchange of these securities, our ability to liquidate this investment will likely be dependent on a liquidity event.
−Removed: Valuations of privately-held companies are inherently complex and uncertain due to the lack of readily available market data for such securities.
−Removed: If we determine that this investment has experienced a decline in value, we will be required to recognize an impairment charge in net income.
−Removed: This investment will be accounted for under the equity method under which we report our proportionate share of the net earnings or losses of this private company as a component of Income before income tax provision.
+Added: On October 26, 2022, Midwest AgEnergy announced that it has finalized an agreement, under which the equity holders of Midwest AgEnergy, including NACCO, would sell their equity interests.
+Added: The transaction is expected to close before the end of 2022, however there can be no assurance that the transaction will be finalized in the anticipated timeframe or at all.
+Added: The amount and timing of NACCO’s cash proceeds will be dependent on the terms of the transaction.
+Added: The transaction is not expected to have a material impact on 2022 results of operations based on current estimates.
+Added: If for any reason the proposed merger is not completed, this investment will continue to be accounted for under the equity method under which we report our proportionate share of the net earnings or losses of this private company as a component of Income before income tax provision.
If the earnings or losses of and distributions from this investment is material in any year, those earnings or losses may have a material effect on our net income, cash flows, financial condition and liquidity.
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Additionally, this business is subject to laws, regulations, market conditions and other risks inherent in its operations.
+Added: If the announced transaction is not finalized, this investment is non-marketable and we may not be able to achieve a return on our investment in a timely manner, if at all.
+Added: Midwest Ag Energy’s operating agreement restricts the Company's ability to transfer the membership units, resulting in a liquidity discount.
+Added: Since there is no active market for the exchange of these securities, our ability to liquidate this investment will likely be dependent on a liquidity event.
+Added: Valuations of privately-held companies are inherently complex and uncertain due to the lack of readily available market data for such securities.
+Added: If we determine that this investment has experienced a decline in value, we will be required to recognize an impairment charge in net income.
Any of these factors could adversely impact our results of operations, our cash flows and the value of our investment.
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MLMC has approximately $135 million of long-lived assets, including property, plant and equipment and a coal supply agreement intangible asset, which are subject to periodic impairment analysis and review.
−Removed: Identifying and assessing whether impairment indicators exist, or if events or changes in circumstances have occurred, including assumptions about future power plant dispatch levels, changes in operating costs and other factors that impact anticipated revenue and customer demand, requires significant judgment.
+Added: Identifying and assessing whether impairment indicators exist, or if events or changes in circumstances have occurred, including assumptions about future power plant dispatch levels, changes in operating
+Added: costs and other factors that impact anticipated revenue and customer demand, requires significant judgment.
Actual future operating results could differ significantly from these estimates, which may result in an impairment charge in a future period, which could have a substantial impact on the Company’s results of operations.
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MLMC delivers coal to the Red Hills Power Plant in Ackerman, Mississippi.
−Removed: The Red Hills Power Plant supplies electricity to TVA under a long-term PPA.
+Added: The Red Hills Power Plant supplies electricity to TVA under a long-term power purchase agreement.
MLMC’s contract with its customer runs through 2032.
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Southern Company publicly disclosed that all required lease payments have been paid in full through December 31, 2021.
−Removed: On July 28, 2022, Southern Company disclosed in its Form 10-Q that on June 30, 2022, Southern Company provided notice to the lessee, CGLP, to terminate the related operating and maintenance agreement effective June 30, 2023.
+Added: On October 27, 2022, Southern Company disclosed in its Form 10-Q, that it provided notice to the lessee, CGLP, to terminate the related operating and maintenance agreement effective June 30, 2023.
The parties to the lease agreement are currently negotiating a potential restructuring, which could result in rescission of the termination notice.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.