Otter Tail working on repairs at Coyote coal plant

Otter Tail (NASDAQ:OTTR) said it will take a few months before a 430-MW lignite coal plant in North Dakota that experienced significant equipment damage during a December fire can resume full-scale power generation.

Otter Tail President and COO Chuck MacFarlane made the comments about the Coyote mine-mouth power plant during a Feb. 10 earnings call.

The fire occurred in early December and workers were able to bring the facility back online at half-power 18 days after the fire. But the plant won’t be able to run at full power for some time, MacFarlane said.  

The vast majority of equipment repairs will be covered by insurance. In the meantime, Otter Tail will be purchasing replacement power to compensate for the reduced generation.  

Otter Tail operates the Coyote plant and shares ownership with several other utilities. According to an Otter Tail website, it owns 35% of the facility. Northern Municipal Power Agency owns 30%; MDU Resources (NYSE:MDU) owns 25% and NorthWestern (NYSE:NWE) owns 10% of Coyote.

Meanwhile, Otter Tail is nearing completion of environmental upgrades at the 475-MW Big Stone coal plant in South Dakota. The construction of environmental controls is 90% complete.

The four-month process of bringing the controls online should start at the end of this month. Total cost of the Big Stone air quality system is $384m (that’s less than the original estimate) and Otter Tail’s share is about $207m.

Otter Tail owns about 54% of Big Stone. NorthWestern and MDU also hold ownership stakes in Big Stone.

Otter Tail is concerned about the Environmental Protection Agency (EPA) Clean Power Plan, especially as it applies to South Dakota.

South Dakota has only one combined-cycle plant. It would have to increase use to 70%, which would trigger lower utilization of the Big Stone coal plant, company officials said.

CEO Jim McIntyre has announced his plans to retire in April. McIntyre will be succeeded by MacFarlane. McIntyre will remain on as a consultant for a period as well.

CEO McIntyre said the Otter Tail Power utility subsidiary did well last year.

“Solid execution and related regulatory cost recovery of approved power plant environmental upgrades and transmission projects resulted in utility net income 14% higher than in 2013. Otter Tail Power Company will continue to grow during the next five years, with $665 million in anticipated capital expenditures between 2015 and 2019 resulting in a projected compounded annual growth rate of 8.6% in utility rate base from $728 million in 2013,” McIntyre said.

Otter Tail continues to invest heavily in electricity transmission, officials said. Capital expenditures on transmission will amount to $55m in 2015 and $90m in 2016. In 2017 the transmission outlay will be $56m followed by $58m in 2018 and $40m in 2019.

The Big Stone to Brookings and Big Stone to Ellendale transmission projects have received their South Dakota permits.

Otter Tail announced its financial results for the year ended Dec. 31, 2014. Consolidated revenues increased 8% to $799.3m compared with $743.4m in 2013.

Consolidated net income from continuing operations increased to $56.9m, or $1.55 per diluted share, from $48.6 million, or $1.33 per diluted share in 2013.

Otter Tail Co. includes the electric utility as well as manufacturing and plastics businesses. Otter Tail has signed letters of intent to sell its construction businesses.

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