NACCO INDUSTRIES INC Management’s Discussion and Analysis of Financial


Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are based upon
management's current expectations and are subject to various uncertainties and
changes in circumstances. Important factors that could cause actual results to
differ materially from those described in these forward-looking statements are
set forth below under the heading "Forward-Looking Statements."
Management's Discussion and Analysis of Financial Condition and Results of
Operations include NACCO Industries, Inc.® ("NACCO") and its wholly owned
subsidiaries (collectively, the "Company"). NACCO brings natural resources to
life by delivering aggregates, minerals, reliable fuels and environmental
solutions through its robust portfolio of NACCO Natural Resources businesses.
The Company operates under three business segments: Coal Mining, North American
Mining ("NAMining") and Minerals Management. The Coal Mining segment operates
surface coal mines for power generation companies and an activated carbon
producer. The NAMining segment is a trusted mining partner for producers of
aggregates, lithium and other minerals. The Minerals Management segment promotes
the development of mineral interests. In addition, Mitigation Resources of North
America® ("Mitigation Resources") provides stream and wetland mitigation

The Company has items not directly attributable to a reportable segment that are
not included as part of the measurement of segment operating profit, which
include primarily administrative costs related to public company reporting
requirements at the parent company and the financial results of Mitigation
Resources and Bellaire Corporation ("Bellaire"). Bellaire manages the Company's
long-term liabilities related to former Eastern U.S. underground mining

All financial statement line items below operating profit (other income,
including interest expense and interest income, the provision for income taxes
and net income) are presented and discussed within this Form 10-Q on a
consolidated basis.

The Company’s operating segments are further described below:

Coal Mining Segment
The Coal Mining segment, operating as The North American Coal Corporation®
("NACoal"), operates surface coal mines under long-term contracts with power
generation companies and an activated carbon producer pursuant to a
service-based business model. Coal is surface mined in North Dakota, Texas,
Mississippi, Louisiana and through September 30, 2021, on the Navajo Nation in
New Mexico. Each mine is fully integrated with its customer's operations.

During the nine months ended September 30, 2021, the Company's operating coal
mines were: Bisti Fuels Company, LLC ("Bisti"), The Coteau Properties Company
("Coteau"), Coyote Creek Mining Company, LLC ("Coyote Creek"), Demery Resources
Company, LLC ("Demery"), The Falkirk Mining Company ("Falkirk"), Mississippi
Lignite Mining Company ("MLMC") and The Sabine Mining Company ("Sabine").

Falkirk operates the Falkirk Mine in North Dakota. Falkirk is the sole supplier
of lignite coal to the Coal Creek Station power plant pursuant to a contract
under which Falkirk also supplies approximately 0.3 million tons of lignite coal
per year to Spiritwood Station power plant. Coal Creek Station and Spiritwood
Station are owned by Great River Energy ("GRE"). In May 2020, GRE announced its
intent to sell or retire Coal Creek Station and modify Spiritwood Station to be
fueled by natural gas.

On June 30, 2021, GRE entered into an agreement to sell Coal Creek Station and
the adjacent high-voltage direct current transmission line to Bismarck, North
Dakota-based Rainbow Energy Center, LLC ("Rainbow Energy") and its affiliates.
The closing of this sale is subject to the satisfaction of certain conditions
and presently, the transaction is expected to close by the end of the first
quarter of 2022. The timing could be accelerated, and the transaction could
close before the end of 2021 if conditions are satisfied earlier than

Upon completion of the sale of Coal Creek Station, the existing Coal Sales
Agreement, the existing Mortgage and Security Agreement and the existing Option
Agreement between GRE and Falkirk will be terminated. Falkirk and GRE have
entered into a termination and release of claims agreement. Upon completion of
the sale of Coal Creek Station, GRE will pay Falkirk $14.0 million in cash, as
well as transfer ownership of an office building located in Bismarck, North
Dakota, and convey membership units in Midwest AgEnergy to NACoal. NACCO
currently holds a $5.0 million investment in Midwest AgEnergy, which operates
two ethanol facilities in North Dakota.



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If GRE's efforts to sell the power plant are successful, a new Coal Sales
Agreement ("CSA") between Falkirk and Rainbow Energy will become effective and
Falkirk will supply all coal requirements of Coal Creek Station concurrent with
Rainbow Energy's acquisition of the power plant. Falkirk will no longer make any
coal deliveries to GRE's Spiritwood Station. Falkirk will be paid a management
fee and Rainbow Energy will be responsible for funding all mine operating costs
and directly or indirectly providing all of the capital required to operate the
mine. The CSA specifies that Falkirk will perform final mine reclamation, which
will be funded in its entirety by Rainbow Energy. The initial production period
is expected to run ten years from the effective date of the CSA, but the CSA may
be extended or terminated early under certain circumstances. If Rainbow Energy
terminates the CSA and closes Coal Creek Station before 2027, Falkirk will be
entitled to an additional payment from GRE under the terms of the termination
and release of claims agreement. The additional payment amount ranges from $8
million if the closure occurs before 2024 to $2 million if the closure occurs in
2026. To support the transfer to new ownership, Falkirk has agreed to a
reduction in the current per ton management fee from the effective date of the
new CSA through May 31, 2024. After May 31, 2024, the per ton management fee
increases to a higher base in line with current fee levels, and thereafter
adjusts annually according to an index which tracks broad measures of U.S.

Bisti supplied the Four Corners Power Plant through its contract mining
agreement with the Navajo Transitional Energy Company ("NTEC"). This contract
mining agreement was terminated effective September 30, 2021. As required under
the agreement, NTEC paid the Company a termination fee of $10.3 million. As of
October 1, 2021, NTEC assumed control and responsibility for operation and all
reclamation of the Navajo Mine.

Sabine operates the Sabine Mine in Texas. All production from Sabine is
delivered to Southwestern Electric Power Company's ("SWEPCO") Henry W. Pirkey
Plant (the "Pirkey Plant"). SWEPCO is an American Electric Power ("AEP")
company. In November 2020, AEP announced its intent to retire the Pirkey Plant
in 2023. SWEPCO expects deliveries from Sabine to continue until the first
quarter of 2023 at which time Sabine expects to begin final reclamation. Funding
for mine reclamation is the responsibility of SWEPCO.

Coteau operates the Freedom Mine in North Dakota. All coal production from the
Freedom Mine is delivered to Basin Electric Power Cooperative ("Basin
Electric"). Basin Electric utilizes the coal at the Great Plains Synfuels Plant
(the "Synfuels Plant"), Antelope Valley Station and Leland Olds Station. The
Synfuels Plant is a coal gasification plant, owned by Dakota Gasification
Company ("Dakota Gas'), a subsidiary of Basin Electric, that manufactures
synthetic natural gas and produces fertilizers, solvents, phenol,...


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