Monday, March 11, 2013

Dominion Sale Shows Old Coal Power Plants Are Nearly Worthless

Kincaid Power StationBig news today as Dominion announced it's selling two old coal-fired power plants and one gas power plant - and the price-tag is eye-popping:
The power stations are:
  • Brayton Point Power Station, a 1,528-megawatt power station in Somerset, Mass., with three coal-fired units and one unit fired by oil or natural gas. Dominion has owned it since 2005.
  • Kincaid Power Station, a 1,158-megawatt power station in Kincaid, Ill., with two 579-megawatt coal-fired units. Dominion has owned Kincaid since 1998.
  • Elwood Power Station, a 1,424-megawatt power station outside Chicago, with nine natural gas-fired combustion turbines. Dominion has owned a 50 percent interest (712 megawatts) in and operated the station since Elwood became operational in 1999.
The sale will require the approval of the Federal Energy Regulatory Commission (FERC) and Hart-Scott-Rodino antitrust clearance.

Dominion announced last September that it was exiting the merchant coal-fired generation business as part of the company's continual review of its assets to ensure they fit strategically and support its objectives to improve return on invested capital and shareholder value. The sale is expected to result in after-tax proceeds of approximately $650 million, which includes cash tax benefits generated from the sale. The company plans to invest the proceeds in the company's regulated businesses and reduce debt needs.
"Merchant power" is basically when you own a station and sell the electricity to a utility. It's always a risky business and at a time when America's electricity use is falling overall and the price of electricity from natural gas is falling, now's looking like a good time to bail for whatever Dominion can get.

But look at that low sale value - and that includes tax write-offs! Considering Dominion had spent $1 billion on upgrades at Brayton Point alone in recent years, including two enormous cooling towers, Dominion must be taking an absolute bath. But especially as new Clean Air Act limits on industrial carbon pollution loom, Dominion's happy to take what it can get for the coal plants.

Speaking of limits on industrial carbon pollution, now would be a good time to tell President Obama you support the strongest limits possible.

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