Equity Method Investments and Membership Interests in Joint Ventures

12 Months Ended

Dec. 31, 2019

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments and Membership Interests in Joint Ventures

Joint Venture with Peabody Energy

On June 18, 2019, Arch Coal entered into a definitive implementation agreement (the “Implementation Agreement”) with Peabody Energy Corporation (“Peabody”), to establish a joint venture that will combine the respective Powder River Basin and Colorado mining operations of Arch Coal and Peabody. Pursuant to the terms of the Implementation Agreement, Arch Coal will hold a 33.5% economic interest, and Peabody will hold a 66.5% economic interest in the joint venture. At the closing of the joint venture transaction, certain of the respective subsidiaries of Arch Coal and Peabody will enter into an Amended and Restated Limited Liability Company Agreement (the “LLC Agreement”). Under the terms of the LLC Agreement, the governance of the joint venture will be overseen by the joint venture’s board of managers, which will initially be comprised of three representatives appointed by Peabody and two representatives appointed by Arch. Decisions of the board of managers will be determined by a majority vote subject to certain specified matters set forth in the LLC Agreement that will require a supermajority vote. Peabody, or one of its affiliates, will initially be appointed as the operator of the joint venture and will manage the day-to-day operations of the joint venture, subject to the supervision of the joint venture’s board of managers.

Formation of the joint venture is subject to customary closing conditions, including the termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the receipt of certain other required regulatory approvals and the absence of injunctions or other legal restraints preventing the formation of the joint venture. Formation of the joint venture does not require approval of the respective stockholders of either Arch or Peabody.

The Company has incurred expenses of $13.8 million during the year ended December 31, 2019 associated with the regulatory approval process of the joint venture.

Equity Method Investments and Membership Interests in Joint Ventures

The Company accounts for its investments and membership interests in joint ventures under the equity method of accounting if the Company has the ability to exercise significant influence, but not control, over the entity. Equity method investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable.

Below are the equity method investments reflected in the consolidated balance sheets: 

(In thousands)	Knight Hawk			DTA			Total
December 31, 2017	$	90,166		$	15,941		$	106,107
Advances to (distributions from) affiliates, net	(10,534		)	2,481			(8,053		)
Equity in comprehensive income (loss)	10,389			(3,767		)	6,622
December 31, 2018	$	90,021		$	14,655		$	104,676
Sale of investment in affiliates	(1,879		)	—			(1,879		)
Advances to (distributions from) affiliates, net	(5,884		)	5,500			(384		)
Equity in comprehensive income (loss)	7,953			(4,778		)	3,175
December 31, 2019	$	90,211		$	15,377		$	105,588

 In December 2019, the Company sold 1% of its ownership interest in Knight Hawk Holdings, LLC (“Knight Hawk”) to a third party for $2.0 million. After the transaction, the Company holds a 48% equity interest in Knight Hawk, a coal producer in the Illinois Basin.

The Company holds a general partnership interest in Dominion Terminal Associates (“DTA”), which is accounted for under the equity method. In March 2017, the Company paid $7.2 million through an auction process held by one of the existing owners, increasing its ownership in DTA from 21.875% to 35%. DTA operates a ground storage-to-vessel coal transloading facility in Newport News, Virginia for use by the partners. Under the terms of a throughput and handling agreement with DTA, each partner is charged its share of cash operating and debt-service costs in exchange for the right to use the facility’s loading capacity and is required to make periodic cash advances to DTA to fund such costs.

The Company is not required to make any future contingent payments related to development financing for any of its equity investees.