Railroad considers buying Seward coal terminal

Posted: Sunday, April 06, 2003

ANCHORAGE (AP) -- A proposed deal for the Alaska Railroad to buy coal-loading facilities at Seward could re-ignite sales of the fuel to South Korea but railroad officials say they need more time to determine whether the arrangement is fair.

The equipment has been idle since last fall when a coal contract between Usibelli Coal Mine of Healy and the South Koreans dried up.

U.S. Sen. Ted Stevens, R-Alaska, secured a $9.6 million federal appropriation for the state-owned Alaska Railroad to buy the Seward coal terminal from Hyundai Merchant Marine America, majority owner, and the Alaska Industrial Development and Export Authority, which owns 49 percent.

But railroad officials say they're scrambling to crunch numbers and come up with an agreement. The negotiations are taking time because it's a complicated deal, and not one the railroad asked for.

''We didn't engineer this. We were kind of caught flat-footed,'' said Steve Silverstein, vice president of markets, sales and services.

The $9.6 million was tucked inside the federal budget bill Congress passed in late February.

Usibelli had shipped Healy coal to South Korea since 1984. When the contract ended, some 30 mine workers lost their jobs.

When Congress approved the funds, negotiations ensued involving Hyundai, the railroad, Usibelli, the Korean electric utility that buys the coal and AIDEA. The Korean utility agreed to a smaller contract for two years provided Hyundai could sell coal at a lower price, comparable to Indonesian coal.

Hyundai agreed, but the Seoul-based company wanted out of an annual $850,000 debt payment to AIDEA on the terminal. If those payments could go away, it would help Hyundai absorb the price gap on the coal sold to the Koreans, said Young Jin Park, Hyundai general manager in Seward.

Park told the Anchorage Daily News on Thursday that the railroad has ''delayed and delayed'' and the Korean coal buyers are getting antsy and may walk if shipments do not resume in the next two weeks.

''Our buyer is very upset,'' Park said.

Silverstein said the railroad and Hyundai are close to coming to terms and a purchase agreement will likely be announced this week.

Hyundai's attorney, William Bittner, was somewhat less convinced.

''I'd say it's 50-50,'' Bittner said.

Hyundai and the railroad have not agreed on a price. The Korean company proposed getting $2.5 million from the railroad, Bittner said. But the railroad apparently offered a lot less.

''When I heard their price, I was shocked,'' Park said.

Park, Bittner and Silverstein would not reveal the railroad's offer but Silverstein did say the railroad wants to hold onto some of the $9.6 million and use it for terminal upgrades. Railroad officials are concerned that if the Korean contract goes away again in two years they could get stuck with a dormant coal terminal.

Others say there are other potential uses for the Seward plant, such as gravel shipments.

The railroad would be getting the terminal essentially for free, said Edgar Blatchford, Department of Community and Economic Development commissioner and former Seward mayor.

Even if the coal contract ends, it would be in the state's interest to have a bulk commodity loading facility connected to the rail, Blatchford said.



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