Ameren Missouri plans to take refined coal from Goldman Sachs unit

Union Electric d/b/a Ameren Missouri asked the Missouri Public Service Commission on May 28 for authority to sell coal, and lease a small portion of its property at the Sioux Energy Center, as part of a program to utilize refined coal in order to lower costs and reduce emissions.

The filing was heavily redacted, so few details remain in public view. The company said it wants to sell Powder River Basin and Illinois Basin coal to GS RC Sioux LLC, a wholly owned subsidiary of the Goldman Sachs Group Inc. The coal will either be sold at the originating mine or out of inventory at the Sioux plant, but in either case at a price that is equal to the cost for the month at the delivery point for the specific type of coal that is being sold.

GS RC will refine the coal using a proprietary process known as Cyclean, which is designed to reduce emissions from the coal, and then resell the coal back to Ameren Missouri at the same price for use at the plant. In addition, Ameren Missouri seeks authority to lease a small portion of its Sioux plant site to GS RC so that GS RC can place coal refinement facilities on the site during the term of this transaction.

The coal refinement equipment is owned by Clean Coal Solutions/AM-S LLC, but it will be utilized by GS RC for coal refinement.

This transaction has been designed to qualify under Internal Revenue Code Section 45, which authorizes a tax credit for the use of “refined coal.” Tax credits are available if during the required testing there is at least a 20% reduction in NOx emissions and at least a 40% reduction in either SO2 or mercury emissions. In order to comply with the applicable Internal Revenue Code provisions, the coal must be sold to a coal refiner (in this case GS RC), refined, and then bought back by Ameren Missouri for use in power generation.

GS RC is responsible for demonstrating the test results satisfy Internal Revenue Code standards, and for all costs associated with the process including the cost of refinement equipment, labor, materials, and testing. Certification test results from the Sioux Energy Center in May 2013 met the IRS emission reduction targets for both mercury and NOx emissions, Ameren Missouri told the commission.

Ameren Missouri, as the host utility, will receive payments for the site license fee from GS RC over a period of approximately eight years, as well as a fee for coal yard services, with annual inflation index adjustments.

The commission previously approved in 2011 a very similar transaction for Ameren Missouri’s Rush Island Energy Center, the utility noted.

Ameren Missouri is seeking expedited treatment of the Sioux case and requests that the commission act as soon as possible, but in any event by July 17, 2013, so that it begin taking advantage of these time-limited federal tax credits. Circumstances that delayed the company’s ability to file this application until now include GS RC’s need to obtain a Private Letter Ruling from the Internal Revenue Service and the completion of contract amendments to the originally negotiated agreements.

The Sioux plant is located in St. Charles County, Mo., 28 miles northeast of downtown St. Louis. It is a two-unit, 986-MW coal plant that was completed in 1968. The plant typically burns around 3 million tons of coal annually, said the Ameren website.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.