Go South
There are a number of demographic factors favouring the development
of power plants in the southern US. But while the exodus of people
fleeing cold New England and Middle Atlantic winters to Sunbelt
States provides a continuing stream of customers for power
producers on the retail level, deregulation has not been greeted
warmly in all quarters.
The US federal government has already deregulated the wholesale market with passage of the 1992 Federal Energy Policy Act. The remaining hurdle is deregulation of the retail market ? a thorny issue in some southern states.
Judah Rose, senior vice-president and managing director for wholesale power consulting at ICF Consulting, says: ?Historically, Florida, Georgia and the Carolinas have had strong demand growth ? particularly Florida. And there were significant blackouts in Louisiana and Arkansas last year due to lack of capacity, which emphasises the need for more energy.? The winter of 1996 also punctuated the need for more readily-available power. Like this winter, 1996 was plagued by simultaneous heating peaks in the north-east and air conditioning peaks in the south.
Rose notes that Credit Suisse First Boston (CSFB) recently supplied about $400 million to finance two power plants, one in central Arkansas and another in southern Alabama. Two additional plants are on the drawing board in that region. ?In some parts of the south, there has been significant activity in the last few years.?
?I think it is safe to say that the states from Alabama to Florida have not been as quick to deregulate. And the south-eastern states are lagging behind the rest of the country.? However, a few of these south-eastern states ? such as Virginia ? are taking steps to deregulate, according to Rose. And the state legislatures of both North Carolina and South Carolina have been studying the issue of electric power industry restructuring, or deregulation, since 1997. Some bills have been introduced, but no bill has gone beyond subcommittee. It is uncertain what action the state legislatures will take and when that might be.
John Veech, head of project finance at Lehman Brothers, concurs that regulation has affected deal flow in the southern US. ?There is a lot more activity in the north-east. But this also has been caused by wholesale prices in the south which are sometimes half of what they are in the north-east.? If Lehman has not been a large deal underwriter in the south, the Wall Street firm has provided financing to some of the energy companies with a presence in that region, including Duke, Florida Power and Light and Southern.
What is going on in the convoluted Florida power market has even got the regulators flummoxed. Major energy providers are investing heavy cash to locate merchant plants in a state that does not allow merchant plants. While there indisputably is a need for additional capacity in Florida, the fact that about 25 companies have queued up confounds state regulators. A consultant suggests that a Florida location would provide positioning to serve the Cuban market ? only 90 miles away ? if the Castro regime falls.
The idea may not be that far-fetched. About 70% of Cuba's 11 million citizens live in a handful of cities, with 2 million people ? one-quarter the size of the New York City metropolitan area ? living in Havana. In contrast, the population of the state of Florida is about 15 million.
At the same time, entrenched power giant Florida Power and Light (FPL), profiting from state franchise monopolies, charges that outsiders should be prevented from establishing merchant plants in the state because newcomers would have no vested interest in Florida.
Conversely, FPL is building merchant power plants in other states. Subsidiary FPL Energy ? another unit of parent company FPL Group ? is a leading merchant power producer with interests in power generation projects in 12 states, South America and the UK. And Florida's largest public utilities are big contributors to political warchests.
Even more perversely given FPL's stance over the Florida power market, the parent company is in discussions with Spain's Iberdrola. The Spanish company is rumoured to be making an $11 billion stock and cash offer for FPL Group. If the deal flies, it will be the largest purchase of a US utility by a foreign buyer.
Bill Swank, an FPL official, explains the company's aversion to merchant plants. ?These guys are trying to do an end run and turn the state into a power park. Florida is estimated to need an additional 8,000MW over the next 10 years. Proponents of merchant plants say that the additional required capacity is good reason to allow merchant plants but existing Florida utilities have plans to put an additional over 9,000 MW on line during the same period.
Florida's Power Plant Siting Act, enacted in the 1970s, prevents the proliferation of unnecessary capacity. ?Let's say that a merchant plant comes in and sets up operations. That company would sell to Florida utilities only if the company can get the highest dollar. If not, the output goes out of state. Florida utilities are required to maintain a 20% reserve. We couldn't include the merchant plant output as part of the reserve.
?We have 25 different merchant proposals that have been announced. And even if these companies do locate in Florida they do not have to sell to the Florida utilities. They sell where they can get the highest price. If someone in Alabama agrees to the highest price, none of this output necessarily stays in Florida. They want to build plants, use our water and pollute our air and send profits back to shareholders who may be located in other places. We don't say merchant plants are good or bad. But it should not be up to companies to come in and set up and move the market from there.?
It is not up to those companies. The answer is in the Florida Supreme Court. In early March 1999, the Florida Public Service Commission (PSC) approved plans by Duke Energy Power Services and the Utilities Commission of New Smyrna Beach (UCNSB) to build the state's first merchant power plant. The 514MW New Smyrna Beach Station, will provide 30MW of electricity to the UCNSB for resale to its more than 20,000 customers, with an option for an additional 40MW. The balance is to be marketed to other investor- and municipally owned utilities and electric cooperatives on the open wholesale market. A coalition comprised of Florida's existing utilities challenged the ruling, sending it to the state's Supreme Court. But regardless of the decision, the Florida governor and cabinet have to concur with the court.
Ronald L Vaden, director of the UCNSB, says a decision from the court is expected at any time although there is no time line. Vaden says that while any modernisation or replacement of older existing facilities will be passed off to retail users, Duke will finance its facility and pay some $4 million to the state in taxes. Vaden also refutes claims that merchant plants could export power to the highest bidder outside Florida, noting that it would be technically difficult.
James Dean of the Florida Public Service Commission, the agency which approved the Duke project, says, ?Our case is very strong and we expect to be upheld by the Supreme Court.? Dean added that the Florida utilities also challenged Duke and the UCNSB, claiming that neither meets the definition of applicant for purposes of constructing a plant as neither currently is a retail supplier. That issue is also expected to be addressed in the court's commentary on its decision. Dean predicts that the state will deregulate the industry in three to five years.
Calpine Corp is equally optimistic about deregulation in the Florida market. In January of this year, the company announced that it is expanding its presence in the Florida wholesale power market, with plans to invest approximately $750 million in power generation facilities. Calpine will develop two natural gas-fired energy centres, including the 1,080MW Blue Heron Energy Centre, to be located in Indian River County outside the city of Vero Beach, and the 540MW Osprey Energy Centre, to be located in the city of Auburndale adjacent to Calpine's existing power facility. Together, the proposed energy centres will produce enough electricity to power nearly two million Florida households. Financing for the projects will come from a $1 billion revolving credit facility with CSFB.
A Calpine official says, ?We are poised for the imminent development of merchant plants in Florida. We look at this market as one in which everything is evolving. We are confident that the current governor is pro-competitive and will support a decision by the Supreme Court in upholding the Duke decision.? The official noted that a three-year time frame for deregulation is not a problem as construction is expected to take that long. ?We want to be at the head of the line when the Florida market opens. As I look around, I see the whole alphabet of developers looking to crack the market. In the unlikely event that the Supreme Court decision does not go the way we hope, we will have to go back to the voters.?
Deregulation may be expedited through a bill recently introduced in the Florida legislature by Senator Tom Lee. That legislation calls for establishing a commission composed of representatives of the electric industry, government, and electricity consumers. The commission is to be charged with examining Florida's laws and rules governing the production, transmission, and delivery of electricity; studying activities of other states concerning restructuring or deregulation; and recommending appropriate energy policies for the state which will promote competition while continuing to ensure the provision of adequate and reliable electric energy at affordable rates with minimal adverse effects to human health or the environment.
Gas pipeline
The Florida conundrum also extends to gas pipelines. Few dispute the need for another natural gas pipeline to serve Florida. The question is whether Florida regulators will loosen the reins on projects proposed by new players. From an investor perspective, aside from an inhospitable regulatory environment, the Florida market holds many advantages: market size and growth, comparative position to adjacent markets with the ability to move product between multiple markets, and regional growth potential.
To call Florida's attitude toward deregulation unreceptive is a euphemism. Florida Gas Transmission Co (FGTC) is an interstate pipeline company that transports natural gas for third parties through a 4.9 thousand-mile system extending from South Texas to Miami. FGTC is owned by Citrus Corp, which is a holding company that is 50% owned by a wholly-owned subsidiary of Enron Corp and 50% owned by El Paso Energy. Citrus transports and markets natural gas to markets in Florida, Alabama, Mississippi, Louisiana and Texas. FGTC also is the only natural gas conduit serving utilities in Florida.
FLP is a major user of the pipeline. FPL spokesman Swank says, ?We will continue to purchase gas from Enron to run our plants, and we sell to large commercial customers. Florida recently made changes to allow us to sell to smaller customers, such as restaurants. So we will be using slightly more gas.?
That monopoly may be short-lived. Duke Energy and Williams announced last month that that they have entered into a 50-50 ownership agreement to jointly develop, construct and operate the $1.5 billion Buccaneer Gas Pipeline Project which will transport natural gas to emerging markets in Florida. The 674-mile project will traverse the Gulf of Mexico and come ashore on Florida's western coast. The pipeline is designed to deliver 900,000 dekatherms of natural gas per day to power generation facilities and other natural gas users located throughout the state. Plans for the pipeline were filed with the Federal Energy Regulatory Commission in late October 1999. With today's announcement, Buccaneer officials say the company has firm commitments for over 50% of the project's total capacity. Construction is slated to begin in January 2001 and the project to be placed into service as early as April 2002.
Duke vice-president Rick Rhodes says the joint venture between Duke and Williams moots a deal announced by Duke last summer. At that time, Duke Energy today unveiled plans to build, own and operate the Sawgrass Energy Transmission System ? a major interstate natural gas pipeline project that would supply energy markets in the Southeast. The Sawgrass system was to have had a capacity of about 1 billion cubic feet per day of natural gas, beginning near Coden, Alabama, crossing southern Mobile Bay and continuing into the Florida Panhandle and down the peninsula. That project was to have cost approximately $1.3 billion and was planned to be in service by 2003. Customers were to have included electric generation facilities, as well as large industrial and gas distribution customers. The project has at least one competitor.
In October 1999, Gulfstream filed an application with the Federal Energy Regulatory Commission (FERC) to build and operate the $1.6 billion natural gas delivery system. In January 2000, FERC conducted a series of environmental review meetings, and FERC currently is preparing an environmental impact statement for the project. The proposed 744-mile Gulfstream Natural Gas System will originate near Mobile, Alabama, and cross the Gulf of Mexico to Manatee County, Florida. The main line terminates in Palm Beach County, near Florida's East Coast. Gulfstream will transport to Florida up to 1.13 billion cubic feet per day of natural gas from sources in Alabama and Mississippi. Ten non-affiliated utility and power-production customers have made long-term, binding commitments for the majority of the capacity on the system.
Outside Florida
Credit Suisse First Boston (CSFB) has been active in greenfield power project financings over the past 12 months, including Batesville in Mississippi and Hog Bayou, Louisiana. James Bartlett, vice president in CSFB's energy division, says, ?We expect the development market to be very active over the next two years. Acquisition financings are not as prevalent due to the slow pace of deregulation in these markets.? One exception was the NRG Energy and Southern Company acquisition due to the bankruptcy of the 1,700 MW fossil fuel Cajun Electric Power Cooperative. In late August, a US district court confirmed the winning bid of $1.026 billion by Louisiana Generating LLC, a 50-50 joint venture of the two partners.
Cajun sought bankruptcy protection in December 1994 amid financial problems related to an investment in the River Bend Nuclear Power Plant near St Francisville, Louisiana. Cajun produces and sells electricity to 11 distribution co-operatives, delivering power to more than one million people in Louisiana, as well as four off-system customers.
Going forward, the southern energy market is attractive in terms of demand growth, market breadth and access to liquid markets, says Bartlett. ?We expect the market to continue to be busy for greenfield development.? He adds, ?The slow pace of deregulation primarily is an issue in forecasting plant development by entrenched parties ? such as TVA and others ? and ensuring fair access.? Greenfield projects generally are gas-fired due to lower build costs relative to coal and access to natural gas supply. ?However, deals have been done in both the bank and bond markets, with fuel presenting no particular financing issues.? Likewise, both single plants and portfolios have been financed.
Among projects in process in the south-east, in February Calpine announced plans to build, own and operate a 700MW natural gas-fired cogeneration power plant at Solutia Inc's Decatur, Alabama chemical facility. The proposed Decatur Energy Centre will cost approximately $350 million, with energy deliveries slated to begin in summer 2002. Under terms of a 20-year agreement, Solutia will lease a portion of the facility to meet its electricity needs and purchase its steam requirements from Calpine. Excess power from the facility will be sold into the south-eastern US wholesale power market under a variety of short-, mid-, and long-term contracts. In addition, Calpine will build a new intrastate natural gas pipeline to fuel the new plant. This approach enables Calpine to lower costs, control quality and make project enhancements throughout the development process.
Duke Energy is also constructing two 500MW merchant generating plants in Mississippi ? the Hinds Energy Facility in Jackson, and the Attala Energy Facility, located between McAdams and Kosciusko. Both plants ? which will cost about $170 million each ? will be operational by second quarter 2001. Duke is financing both projects internally.
The US federal government has already deregulated the wholesale market with passage of the 1992 Federal Energy Policy Act. The remaining hurdle is deregulation of the retail market ? a thorny issue in some southern states.
Judah Rose, senior vice-president and managing director for wholesale power consulting at ICF Consulting, says: ?Historically, Florida, Georgia and the Carolinas have had strong demand growth ? particularly Florida. And there were significant blackouts in Louisiana and Arkansas last year due to lack of capacity, which emphasises the need for more energy.? The winter of 1996 also punctuated the need for more readily-available power. Like this winter, 1996 was plagued by simultaneous heating peaks in the north-east and air conditioning peaks in the south.
Rose notes that Credit Suisse First Boston (CSFB) recently supplied about $400 million to finance two power plants, one in central Arkansas and another in southern Alabama. Two additional plants are on the drawing board in that region. ?In some parts of the south, there has been significant activity in the last few years.?
?I think it is safe to say that the states from Alabama to Florida have not been as quick to deregulate. And the south-eastern states are lagging behind the rest of the country.? However, a few of these south-eastern states ? such as Virginia ? are taking steps to deregulate, according to Rose. And the state legislatures of both North Carolina and South Carolina have been studying the issue of electric power industry restructuring, or deregulation, since 1997. Some bills have been introduced, but no bill has gone beyond subcommittee. It is uncertain what action the state legislatures will take and when that might be.
John Veech, head of project finance at Lehman Brothers, concurs that regulation has affected deal flow in the southern US. ?There is a lot more activity in the north-east. But this also has been caused by wholesale prices in the south which are sometimes half of what they are in the north-east.? If Lehman has not been a large deal underwriter in the south, the Wall Street firm has provided financing to some of the energy companies with a presence in that region, including Duke, Florida Power and Light and Southern.
What is going on in the convoluted Florida power market has even got the regulators flummoxed. Major energy providers are investing heavy cash to locate merchant plants in a state that does not allow merchant plants. While there indisputably is a need for additional capacity in Florida, the fact that about 25 companies have queued up confounds state regulators. A consultant suggests that a Florida location would provide positioning to serve the Cuban market ? only 90 miles away ? if the Castro regime falls.
The idea may not be that far-fetched. About 70% of Cuba's 11 million citizens live in a handful of cities, with 2 million people ? one-quarter the size of the New York City metropolitan area ? living in Havana. In contrast, the population of the state of Florida is about 15 million.
At the same time, entrenched power giant Florida Power and Light (FPL), profiting from state franchise monopolies, charges that outsiders should be prevented from establishing merchant plants in the state because newcomers would have no vested interest in Florida.
Conversely, FPL is building merchant power plants in other states. Subsidiary FPL Energy ? another unit of parent company FPL Group ? is a leading merchant power producer with interests in power generation projects in 12 states, South America and the UK. And Florida's largest public utilities are big contributors to political warchests.
Even more perversely given FPL's stance over the Florida power market, the parent company is in discussions with Spain's Iberdrola. The Spanish company is rumoured to be making an $11 billion stock and cash offer for FPL Group. If the deal flies, it will be the largest purchase of a US utility by a foreign buyer.
Bill Swank, an FPL official, explains the company's aversion to merchant plants. ?These guys are trying to do an end run and turn the state into a power park. Florida is estimated to need an additional 8,000MW over the next 10 years. Proponents of merchant plants say that the additional required capacity is good reason to allow merchant plants but existing Florida utilities have plans to put an additional over 9,000 MW on line during the same period.
Florida's Power Plant Siting Act, enacted in the 1970s, prevents the proliferation of unnecessary capacity. ?Let's say that a merchant plant comes in and sets up operations. That company would sell to Florida utilities only if the company can get the highest dollar. If not, the output goes out of state. Florida utilities are required to maintain a 20% reserve. We couldn't include the merchant plant output as part of the reserve.
?We have 25 different merchant proposals that have been announced. And even if these companies do locate in Florida they do not have to sell to the Florida utilities. They sell where they can get the highest price. If someone in Alabama agrees to the highest price, none of this output necessarily stays in Florida. They want to build plants, use our water and pollute our air and send profits back to shareholders who may be located in other places. We don't say merchant plants are good or bad. But it should not be up to companies to come in and set up and move the market from there.?
It is not up to those companies. The answer is in the Florida Supreme Court. In early March 1999, the Florida Public Service Commission (PSC) approved plans by Duke Energy Power Services and the Utilities Commission of New Smyrna Beach (UCNSB) to build the state's first merchant power plant. The 514MW New Smyrna Beach Station, will provide 30MW of electricity to the UCNSB for resale to its more than 20,000 customers, with an option for an additional 40MW. The balance is to be marketed to other investor- and municipally owned utilities and electric cooperatives on the open wholesale market. A coalition comprised of Florida's existing utilities challenged the ruling, sending it to the state's Supreme Court. But regardless of the decision, the Florida governor and cabinet have to concur with the court.
Ronald L Vaden, director of the UCNSB, says a decision from the court is expected at any time although there is no time line. Vaden says that while any modernisation or replacement of older existing facilities will be passed off to retail users, Duke will finance its facility and pay some $4 million to the state in taxes. Vaden also refutes claims that merchant plants could export power to the highest bidder outside Florida, noting that it would be technically difficult.
James Dean of the Florida Public Service Commission, the agency which approved the Duke project, says, ?Our case is very strong and we expect to be upheld by the Supreme Court.? Dean added that the Florida utilities also challenged Duke and the UCNSB, claiming that neither meets the definition of applicant for purposes of constructing a plant as neither currently is a retail supplier. That issue is also expected to be addressed in the court's commentary on its decision. Dean predicts that the state will deregulate the industry in three to five years.
Calpine Corp is equally optimistic about deregulation in the Florida market. In January of this year, the company announced that it is expanding its presence in the Florida wholesale power market, with plans to invest approximately $750 million in power generation facilities. Calpine will develop two natural gas-fired energy centres, including the 1,080MW Blue Heron Energy Centre, to be located in Indian River County outside the city of Vero Beach, and the 540MW Osprey Energy Centre, to be located in the city of Auburndale adjacent to Calpine's existing power facility. Together, the proposed energy centres will produce enough electricity to power nearly two million Florida households. Financing for the projects will come from a $1 billion revolving credit facility with CSFB.
A Calpine official says, ?We are poised for the imminent development of merchant plants in Florida. We look at this market as one in which everything is evolving. We are confident that the current governor is pro-competitive and will support a decision by the Supreme Court in upholding the Duke decision.? The official noted that a three-year time frame for deregulation is not a problem as construction is expected to take that long. ?We want to be at the head of the line when the Florida market opens. As I look around, I see the whole alphabet of developers looking to crack the market. In the unlikely event that the Supreme Court decision does not go the way we hope, we will have to go back to the voters.?
Deregulation may be expedited through a bill recently introduced in the Florida legislature by Senator Tom Lee. That legislation calls for establishing a commission composed of representatives of the electric industry, government, and electricity consumers. The commission is to be charged with examining Florida's laws and rules governing the production, transmission, and delivery of electricity; studying activities of other states concerning restructuring or deregulation; and recommending appropriate energy policies for the state which will promote competition while continuing to ensure the provision of adequate and reliable electric energy at affordable rates with minimal adverse effects to human health or the environment.
Gas pipeline
The Florida conundrum also extends to gas pipelines. Few dispute the need for another natural gas pipeline to serve Florida. The question is whether Florida regulators will loosen the reins on projects proposed by new players. From an investor perspective, aside from an inhospitable regulatory environment, the Florida market holds many advantages: market size and growth, comparative position to adjacent markets with the ability to move product between multiple markets, and regional growth potential.
To call Florida's attitude toward deregulation unreceptive is a euphemism. Florida Gas Transmission Co (FGTC) is an interstate pipeline company that transports natural gas for third parties through a 4.9 thousand-mile system extending from South Texas to Miami. FGTC is owned by Citrus Corp, which is a holding company that is 50% owned by a wholly-owned subsidiary of Enron Corp and 50% owned by El Paso Energy. Citrus transports and markets natural gas to markets in Florida, Alabama, Mississippi, Louisiana and Texas. FGTC also is the only natural gas conduit serving utilities in Florida.
FLP is a major user of the pipeline. FPL spokesman Swank says, ?We will continue to purchase gas from Enron to run our plants, and we sell to large commercial customers. Florida recently made changes to allow us to sell to smaller customers, such as restaurants. So we will be using slightly more gas.?
That monopoly may be short-lived. Duke Energy and Williams announced last month that that they have entered into a 50-50 ownership agreement to jointly develop, construct and operate the $1.5 billion Buccaneer Gas Pipeline Project which will transport natural gas to emerging markets in Florida. The 674-mile project will traverse the Gulf of Mexico and come ashore on Florida's western coast. The pipeline is designed to deliver 900,000 dekatherms of natural gas per day to power generation facilities and other natural gas users located throughout the state. Plans for the pipeline were filed with the Federal Energy Regulatory Commission in late October 1999. With today's announcement, Buccaneer officials say the company has firm commitments for over 50% of the project's total capacity. Construction is slated to begin in January 2001 and the project to be placed into service as early as April 2002.
Duke vice-president Rick Rhodes says the joint venture between Duke and Williams moots a deal announced by Duke last summer. At that time, Duke Energy today unveiled plans to build, own and operate the Sawgrass Energy Transmission System ? a major interstate natural gas pipeline project that would supply energy markets in the Southeast. The Sawgrass system was to have had a capacity of about 1 billion cubic feet per day of natural gas, beginning near Coden, Alabama, crossing southern Mobile Bay and continuing into the Florida Panhandle and down the peninsula. That project was to have cost approximately $1.3 billion and was planned to be in service by 2003. Customers were to have included electric generation facilities, as well as large industrial and gas distribution customers. The project has at least one competitor.
In October 1999, Gulfstream filed an application with the Federal Energy Regulatory Commission (FERC) to build and operate the $1.6 billion natural gas delivery system. In January 2000, FERC conducted a series of environmental review meetings, and FERC currently is preparing an environmental impact statement for the project. The proposed 744-mile Gulfstream Natural Gas System will originate near Mobile, Alabama, and cross the Gulf of Mexico to Manatee County, Florida. The main line terminates in Palm Beach County, near Florida's East Coast. Gulfstream will transport to Florida up to 1.13 billion cubic feet per day of natural gas from sources in Alabama and Mississippi. Ten non-affiliated utility and power-production customers have made long-term, binding commitments for the majority of the capacity on the system.
Outside Florida
Credit Suisse First Boston (CSFB) has been active in greenfield power project financings over the past 12 months, including Batesville in Mississippi and Hog Bayou, Louisiana. James Bartlett, vice president in CSFB's energy division, says, ?We expect the development market to be very active over the next two years. Acquisition financings are not as prevalent due to the slow pace of deregulation in these markets.? One exception was the NRG Energy and Southern Company acquisition due to the bankruptcy of the 1,700 MW fossil fuel Cajun Electric Power Cooperative. In late August, a US district court confirmed the winning bid of $1.026 billion by Louisiana Generating LLC, a 50-50 joint venture of the two partners.
Cajun sought bankruptcy protection in December 1994 amid financial problems related to an investment in the River Bend Nuclear Power Plant near St Francisville, Louisiana. Cajun produces and sells electricity to 11 distribution co-operatives, delivering power to more than one million people in Louisiana, as well as four off-system customers.
Going forward, the southern energy market is attractive in terms of demand growth, market breadth and access to liquid markets, says Bartlett. ?We expect the market to continue to be busy for greenfield development.? He adds, ?The slow pace of deregulation primarily is an issue in forecasting plant development by entrenched parties ? such as TVA and others ? and ensuring fair access.? Greenfield projects generally are gas-fired due to lower build costs relative to coal and access to natural gas supply. ?However, deals have been done in both the bank and bond markets, with fuel presenting no particular financing issues.? Likewise, both single plants and portfolios have been financed.
Among projects in process in the south-east, in February Calpine announced plans to build, own and operate a 700MW natural gas-fired cogeneration power plant at Solutia Inc's Decatur, Alabama chemical facility. The proposed Decatur Energy Centre will cost approximately $350 million, with energy deliveries slated to begin in summer 2002. Under terms of a 20-year agreement, Solutia will lease a portion of the facility to meet its electricity needs and purchase its steam requirements from Calpine. Excess power from the facility will be sold into the south-eastern US wholesale power market under a variety of short-, mid-, and long-term contracts. In addition, Calpine will build a new intrastate natural gas pipeline to fuel the new plant. This approach enables Calpine to lower costs, control quality and make project enhancements throughout the development process.
Duke Energy is also constructing two 500MW merchant generating plants in Mississippi ? the Hinds Energy Facility in Jackson, and the Attala Energy Facility, located between McAdams and Kosciusko. Both plants ? which will cost about $170 million each ? will be operational by second quarter 2001. Duke is financing both projects internally.
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