Houston company pulls out of coal-powered plant project

A key backer for one of three coal-fired power projects in Nevada announced Friday that it was ending its participation in the project.

Dynegy Inc. of Houston said that it and LS Power Associates of East Brunswick, N.J., are dissolving their development joint venture for the Nevada generation plant and other new projects.

The joint venture was developing the 1,600-megawatt White Pine Energy Station near Ely and the Southwest Intertie Project, a transmission line that could provide the first direct connection between electric utilities in Southern Nevada and Northern Nevada.

LS Power will acquire full ownership and development rights for the White Pine project, the transmission line and new developments in four other states as a result of the dissolution.

The New Jersey company will continue work on the transmission and power plant projects in Nevada, Mark Milburn, LS Power's project development director, said.

"We're 100 percent committed to all of our Nevada projects," Milburn said. "Nothing changes on the ground."

"It just kind of allows us to do what we do best," which is develop new power plants and transmission lines, he said. Dynegy is more focused on operating plants it owns, rather than on developing new ones, he said.

LS Power, a private company, owns 40 percent of the outstanding shares of publicly held Dynegy.

The two companies formed the joint venture two years ago to build coal and gas-fired power plants. Since then, environmentalists have urged regulators to stop the coal-fired power projects, saying the plants would throw off large quantities of carbon dioxide that leads to global warming.

In explaining its exit, Dynegy also referred to the need to obtain financing for the projects. The credit crunch has made it difficult to finance major projects, energy industry insiders say.

"Today, the development of new generation is increasingly marked by barriers to entry including external credit and regulatory factors that make development much more uncertain," Dynegy Chairman and Chief Executive Officer Bruce Williamson said in a statement.

With the joint venture's dissolution, LS Power alone will pursue new projects in Nevada and other states, Dynegy said. LS Power also will get $19 million in cash during the first quarter.

Bruce Nilles, national coal campaign director at the Sierra Club on Friday applauded the announcement in a statement.

"Dynegy has been the largest developer of new coal-fired power plants in the country, and it seems like the company has recognized our efforts to move to a clean energy future," he said.

But Milburn said the loss of Dynegy's backing will not hamper the Nevada projects; he cited the company's track record for building successful power plants.

LS Power has $4 billion in private equity and expects to obtain commitments from utilities wanting to buy the power before seeking financing for the project, Milburn said.

Milburn expects to obtain a final air permit for the project early this year from the Nevada Division of Environmental Protection and approval from the Public Utilities Commission by April.

Appeals would delay the project. Environmentalists have aggressively opposed the LS Power plant, the nearby Ely Energy Center project of NV Energy Inc. and Sithe Global Power's coal-fired project outside of Mesquite.

However, LS Power has drawn little opposition to build the first segment of the Southwest Intertie Project, a 500-kilovolt transmission line that would run 234 miles from Las Vegas to a site near Ely.

Although the power line could carry electricity from the White Pine power plant, the transmission line also could carry geothermal, wind and other kinds of renewable energy.

NV Energy also wants to build a line along the similar route, but the utility company has yet to obtain approval from the BLM for use of federal land. BLM late last year granted approval to LS Power to use federal land to build the Southwest Intertie Project.

LS Power proposes to build a second phase that would run from Nevada to a substation in Idaho.

LS Power is evaluating offers for transmission before deciding whether it's feasible to build the transmission line, Milburn said. Construction on the transmission line could start by year's end.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.