* Edwardsport price raised third time, nearing $3 billion
* Plant's original price tag was $1.985 billion
* Duke and merger partner, Progress, both coal-reliant
Oct 20 (Reuters) - Duke Energy Corp raised the cost estimate for its Indiana coal-gasification project a third time on Thursday, by 9.6 percent to $2.98 billion, excluding financing costs, the company said in a filing.
Duke said the higher price tag, up from $2.72 billion, or $2.88 billion with financing, was due to unfavorable productivity trends, higher material needs and construction changes at the 618-MW Edwardsport integrated gasification combined cycle (IGCC) plant which is 95 percent complete.
The IGCC process converts coal into a synthetic gas which can be stripped of sulfur, mercury and particulate matter before being used to fuel a combustion turbine to produce electricity. The process also allows for carbon dioxide to be captured before the fuel is burned.
Duke has been pursuing the Edwardsport project in Knox County, Indiana, since 2005 as its fleet of aging coal-fired power plants faces shutdowns due to increasingly stringent air pollution standards.
Only a few IGCC projects in the U.S. are moving forward due to rising costs, engineering challenges and a lack of regulation to reduce carbon emissions.
Duke said it has spent about $2.9 billion on Edwardsport through Sept. 30, including $200 million in financing costs.
Edwardsport is expected to begin operating in 2012.
Duke is working to complete a $13.7 billion merger with Progress Energy . Both companies are based in North Carolina and rely heavily on coal-fired generation.
Duke and Progress have announced plans to shut at least 3,400 MW of coal generation and will have another 3,500 MW of coal plants without pollution controls.
Duke's Indiana utility will recognize a $220 million pre-tax impairment charge in the third quarter due to the cost revision, according to a Securities and Exchange filing.
The charge, which will reduce Duke's quarterly earnings by about 10 cents per share, will be treated as "special item."
In March, Duke proposed to cap the Edwardsport construction costs to be passed along to utility customers at $2.72 billion, excluding finance costs.
If the cost cap is approved by the Indiana Utility Regulatory Commission, it will limit the amount of construction costs that can be added to Indiana rates.