Dynegy rejects Foresight Energy proposal for Newton coal supply

Coal producer Foresight Energy’s proposal to finance Ameren Energy Resources‘ Newton SO2 scrubber project through a surcharge on Foresight’s Illinois Basin high sulfur coal is not operationally and economically feasible, said Dynegy in a Sept. 18 statement.

Foresight Energy, founded by coal operator Chris Cline, has over the last several years built itself into a major Illinois coal producer with the development of longwall-equipped mines in the high-sulfur No. 6 coal seam. Dynegy is currently working on a buy of several Ameren coal plants in Illinois and is asking the Illinois Pollution Control Board to allow it to continue a slowed scrubber installation program at Newton to save money in a currently down power market.

Dynegy said its analysis of the Ameren assets included evaluating the use of Illinois Basin coal and that the company concluded it was not a viable alternative from a commercial, operating, and financial perspective. The Ameren plants mostly burn Powder River Basin coal from Wyoming, despite being near the Illinois coalfields.

U.S. Energy Information Administration data shows that Newton’s coal suppliers earlier this year were the North Antelope Rochelle mine of Peabody Energy (NYSE: BTU) and the Black Thunder mine of Arch Coal (NYSE: ACI), both in the Wyoming PRB.

Today, more than $250m has been spent on the construction of the Newton scrubber and the engineering and design work did not contemplate the use of high-sulfur Illinois coal, Dynegy said.

“Modifying scrubber designs at this late juncture materially escalates the engineering and construction costs to complete the scrubber project and likely extends the timetable to achieve the commercial operating startup date,” Dynegy added. “Additionally, there are several other material factors that result in this not being a viable alternative. For example, the facilities to which Foresight proposes to provide Illinois coal have existing long-term multiyear rail agreements and coal supply contracts in place for cleaner burning low-sulfur coal which cannot be terminated without significant financial penalties. Small scale operating tests of this Illinois basin coal, performed earlier this year, were unsuccessful and resulted in costly equipment repairs. Accordingly, the Foresight Energy proposal completely lacks merit and is absolutely not a viable alternative.”

The Ameren plants Dynegy wants to buy are:

  • Newton, 1,215 MW;
  • Joppa, 1,002 MW;
  • Coffeen, 895 MW.
  • E.D. Edwards, 650 MW; and
  • Duck Creek, 410 MW.

Dynegy already owns coal-fired plants in Illinois: Baldwin (Randolph County); Havana (Mason County); Hennepin (Putnam County); and Wood River (Madison County). In November 2011, Dynegy permanently retired a fifth coal-fired plant, Vermilion in Vermilion County.

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.