Westmoreland Coal to shut its 230-MW Roanoke Valley plant as of March 2017

Westmoreland Coal (Nasdaq: WLB) on Dec. 28 announced that it amended its power supply agreement with Dominion Virginia Power, a subsidiary of Dominion Resources (NYSE: D), to allow the shutdown early next year of the two units at the coal-fired Roanoke Valley power plant in North Carolina.

Beginning March 1, 2017, Westmoreland will create cash savings as it will no longer be required to operate the Roanoke Valley (ROVA plant). Under the amendment, Westmoreland will begin to provide the required contracted level of energy to Dominion through power purchase contracts, in lieu of providing it by operating ROVA.

“Amending the ROVA contract is a successful step toward our goal of reducing the impact of our non-core assets,” said Kevin Paprzycki, Westmoreland’s Chief Executive Officer. “This amendment allows us to meet our future capacity obligations through purchase contracts, instead of running our ROVA facility. By no longer operating ROVA, we will reduce our projected cash flow burn by $13 million through March 2019, with the most meaningful cash savings occurring in 2019. Additionally, we are now more aggressively pursuing the sale of the remaining physical facility.”

Westmoreland continues to anticipate the release during 2017 of nearly half of the $22 million in restricted cash in place at Sept. 30, 2016. This restricted cash serves as collateral for existing ROVA power contracts. Recent higher power prices are expected to lower the required cash collateral levels.

Generation Hub had previously reported that PJM Interconnection said in a Dec. 5 update of its pending deactivation list that it got Dec. 1 deactivation requests for the Roanoke Valley 1 and 2 units, with the units to be shut as of March 1, 2017. They are:

  • Roanoke Valley 1, 165 MW, located in the Dominion (DOM) zone, unit is 22 years old; and
  • Roanoke Valley 2, 44 MW, DOM zone, 21 years old.

Westmoreland said about the plants in its March 14 annual Form 10-K report: “We own two coal-fired power-generating units in Weldon, North Carolina with a total capacity of approximately 230 megawatts, which we refer to collectively as ROVA. We built ROVA, which commenced operations in 1994, as a Public Utility Regulatory Policies Act co-generation facility to supply Dominion North Carolina Power (“DNCP”). ROVA is held by our wholly-owned subsidiary Westmoreland Partners. … ROVA purchases coal under short-term contracts from coal suppliers with identified reserves located in Central Appalachia, and supplies the power it produces to DNCP.”

Westmoreland Coal is the oldest independent coal company in the United States. Westmoreland’s coal operations include surface coal mines in the United States and Canada, underground coal mines in Ohio and New Mexico, a char production facility, and a 50% interest in an activated carbon plant. Westmoreland also owns the general partner of and a majority interest in Westmoreland Resource Partners LP, a publicly-traded coal master limited partnership (NYSE: WMLP). 

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.