Unlike Kewaunee, Dominion finds suitors for merchant coal units

Although Dominion (NYSE: D) was unable to line up a buyer for the Kewaunee nuclear plant in Wisconsin, company officials are confident that won’t be the case for some major merchant fossil fuel units that it put on the market in September.

Kewaunee is a “very unfortunate situation,” Dominion CEO Thomas Farrell II said during an Oct. 25 earnings call. “We couldn’t make it work and apparently nobody else could either.”

After putting Kewaunee up for sale in early 2011, Dominion announced Oct. 22 that it would close and start to decommission its 556-MW Kewaunee plant in mid-2013.

But don’t expect that to be the case for the Brayton Point, Kincaid and Elwood plants, Farrell said. Dominion said it September that it was leaving the merchant coal power business and would divest the trio of major merchant fossil plants in Massachusetts and Illinois.

“We have very high interest in those plants,” Farrell said. “We have had many, many parties express interest” in the fossil plants, Farrell said. They won’t suffer the same fate as Kewaunee, he predicted.

Kewaunee was unfortunate because it was a small, single-unit nuclear plant located far from the rest of Dominion’s fleet and in the Midwest ISO in an area where it lacked capacity payments.

Mild weather, Millstone, infrastructure highlight quarter

Dominion saw its quarterly financial performance affected by mild weather at its regulated Virginia fleet while its merchant power fleet suffered because the Millstone Unit 2 nuclear facility in Connecticut was out of service for about two weeks. The Millstone issue was due to high cooling water temperatures.

The company also maintains its aggressive power plant construction efforts in Virginia.

Farrell noted that the roughly 600-MW Virginia City Hybrid plant, fueled by coal and biomass, came online in July in Wise County, Va. The $1.8bn project was completed on-time and on-budget, company officials said. The biomass capability should be ready in the fourth quarter, the CEO said.

In addition, construction is going well at the 1,300-MW dual-unit, combined-cycle natural gas complex in Warren County, Va. The $1.1bn Warren County project is scheduled for completion in late 2014.

Another natural gas power plant, roughly equal in size to the one in Warren County, has been proposed for Brunswick County, Va. Dominion plans to file its certificate for public convenience and necessity, as well as a rate rider application, for the Brunswick plant in the fourth quarter.

“We recently executed an Engineering, Procurement and Construction (EPC) agreement and plan to file for regulatory approval in the fourth quarter with an expected commercial operation in 2016,” Farrell said of Brunswick County.

Dominion also said the conversion of three small coal plants to biomass should be completed in 2013. Likewise, Dominion is planning to convert a couple of coal-fired power units to natural gas by mid-2014.

The coal-to-biomass conversions of Altavista, Southampton and Hopewell are proceeding on schedule and projected to come online by year end 2013. Also, Dominion recently filed an application with the Virginia State Corporation Commission for a coal-to-natural gas conversion of its 227-MW Bremo coal plant. 

On the weather front, Dominion said the third quarter weather impact was milder than expected due to a late June “derecho” storm and low humidity. More than a million Dominion customers were without power following the late June derecho storm.

Lower humidity also offset the increased number of cooling degree days during the quarter.

Dominion also expects a court decision in Virginia by the end of the year on its return on equity for its regulated operations.

On other topics, Farrell expressed confidence that Dominion will prevail in any legal and regulatory challenges to its planned Cove Point liquefied natural gas facility in Lusby, Md. Dominion Cove Point received authorization in October 2011 from the Department of Energy to enter into contracts to export liquefied natural gas to countries that have free trade agreements with the United States.

Dominion expects fourth-quarter 2012 operating earnings in the range of 65 cents per share to 75 cents per share as compared to original fourth-quarter 2011 operating earnings of 58 cents per share.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.