HOUSTON, Dec 11 (Reuters) - Power producer Dynegy Inc DYN.N is reevaluating its role in developing new power plants, including two coal-fired plants currently under construction in Texas and Arkansas, Chief Executive Bruce Williamson said.
Citing the high cost of capital and difficulty in permitting new coal-fired power plants, Williamson said the company wants to protect cash flow and avoid complex financial arrangements.
“This has resulted in a reevaluation of our participation in future greenfield development activities,” Williamson told analysts and investors on a call Wednesday. “This is in light of rising barriers to entry, including the tightening credit markets.”
Houston-based Dynegy has come under fire from environmental groups for its development of a number of coal-fired power plants across the country. Coal plants emit more carbon dioxide than other fossil-fuel generators. CO2 is a greenhouse gas blamed for global warming.
Dynegy’s reevaluation includes activity related to siting, permitting, financing and construction of at least six coal or natural gas projects, a spokesman said.
It also includes a reassessing of the company’s investment in two coal plants currently under construction: the 665-megawatt Plum Point power plant in Osceola, Arkansas, in which Dynegy own 21 percent, and the 900-MW Sandy Creek station under construction in Riesel, Texas, in which Dynegy holds a 32 percent stake.
Instead of pursuing so-called “greenfield” projects at new sites, Williamson said Dynegy will look at adding generation at its existing sites in power markets where it is most active - the Northeast, Midwest and Western U.S.
Plum Point and Sandy Creek are outside those core markets, Williamson said.
In the past year, Dynegy has sold stakes in Plum Point and Sandy Creek to raise cash and reduce Dynegy’s credit requirements tied to those projects.
“We just think that a better use of our time and capital is to look at opportunities internally,” Williamson said on the call. Repowering projects at existing sites will “fit in with our portfolio over the longer term,” he said.
Any development plan may have to compete with efforts to repurchase shares or retire bonds, Williamson said.
In 2007, Dynegy purchased 8,000 MW of generation from LS Power Group and formed a 50-50 joint venture with LS to develop new generation. Initially, the development pipeline included nine projects totaling 7,600 MW.
A Dynegy spokesman confirmed six greenfield projects to be reassessed: the 1,600-MW White Pine coal plant in Nevada; the 750-MW Elk Run coal project in Iowa; the 750-MW Mid-Michigan coal plant, the 1,200-MW West Deptford gas-fired plant in New Jersey; the 1,200-MW Longleaf coal plant in Georgia; and a 665-MW expansion at Plum Point.
Officials with privately-held LS in New York could not be reached for comment, but the company is a 40 percent owner of Dynegy and has three executives on the Dynegy board. (Reporting by Eileen O’Grady; Editing by Christian Wiessner)
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