Due to factors like increased concerns over environmental compliance at the coal-fired Colver power plant in Pennsylvania, Fitch Ratings said March 26 that it has downgraded certain Pennsylvania Economic Development Financing Authority bonds for the Colver plant.
Negative factors include that despite 75% of the plant’s coal supply being under contract, the project is exhibiting decreased cash flow due to increased operating costs, Fitch noted. Also, more stringent emissions regulations than currently contemplated under the Cross-State Air Pollution Rule (CSAPR) could increase the project’s cost burden.
The overall cost profile has climbed steadily over the life of the project. Higher commodity costs, especially diesel, have led to a significant increase in plant operating costs, which rose 17% during 2011 and are expected to increase again in 2012, Fitch said. Diesel prices affect fuel transportation and ash disposal costs.
On the positive side, 2011 plant availability was 95.1%, in line with the base case expectation of 94.9%. Fitch said that Colver has consistently achieved near 100% dispatch over the last three years, resulting in consistent energy deliveries and growing revenue.
The project currently utilizes low-cost limestone to reduce SO2 emissions and, based on short-term tests, expects to meet the CSAPR requirements through the use of additional limestone without additional capital expenditures. The project sponsor is also exploring other means of SO2 reduction in the event that limestone injections aren’t enough.
The Colver project consists of a nominal 111.15 MW waste coal-fired qualifying facility located on a 62-acre site in Cambria, Pa. The project also includes a 9.6-mile, 115-kV transmission line interconnecting with the Penelec Glory Substation. The Colver facility began commercial operations in May 1995.
Colver’s sponsor is a limited partnership, Inter-Power/AhlCon Partners, which is held by subsidiaries of Constellation Energy Group, now part of Exelon (NYSE:EXC), and Northern Star Generation. Under the terms of a power purchase agreement, Penelec pays flat rates on annual energy up to 278 GWh of on-peak production and 501 GWh/year of off-peak production, Fitch noted.