Dominion (NYSE: D) Unloading Coal Assets

Brian Hicks

Written By Brian Hicks

Posted March 18, 2013

Dominion Resources Inc. (NYSE: D) announced last Monday that it would be unloading New England’s largest coal-fired power plant along with two others to Energy Capital Partners, a private equity firm based out of New Jersey.

The deal is expected to reach $650 million, which includes tax benefits after the sale, and it is set to transfer to Energy Capital during the second quarter of 2013.

The 3 power stations, according to PennEnergy:

  • Brayton Point Power Station, 1,528 megawatts. Located in Somerset, Mass. and owned by Dominion since 2005; runs three units by coal and one by oil or natural gas.

  • Kincaid Power Station, 1,158 megawatts. Located in Kincaid, Ill. and owned by Dominion since 1998; runs two 579-megawatt coal-fired units.

  • Elwood Power Station, 1,424 megawatts. Located outside Chicago, Dominion has had 50 percent ownership (712 megawatts) and has operated its nine natural gas-fired combustion turbines since the station became operational in 1999.

The move doesn’t come as much of a shocker, as Dominion announced back in September that it would be looking for a buyer.

In that time, the three power stations have all been renewed to tip-top shape, with complete renovations and upgrades to ensure they are compliant with air and water emissions regulated by both state and federal law.

Dan Genest, a Dominion spokesman, told Midwest Energy News in an email both companies would benefit:

“When we announced our intentions last fall to sell the power stations, we said they were valuable assets with great employees that would be attractive to the right buyer,” he said. “For our part, the sale fits in well with our strategy to decrease our risk by reducing our merchant operations and focusing more on our regulated assets.”

True to his word and the direction of Dominion, focus has shifted more to regulated assets and affairs, and this transaction completes a divestment of merchant power that began last year. The company plans to re-invest proceeds from the Energy Capital deal into its regulatory businesses.

One other Dominion plant – Salem Harbor Power Station, which the company already sold – will become a 630 megawatt gas plant by 2016, built by buyer Footprint Power LLC, according to Midwest Energy News.

But many are skeptical of this so called ‘strategy’ and see it more as a diversion away from the use of coal as a legitimate source for power generation.

The industry as a whole is steering towards the use of natural gas as a base load power generating fuel, and many wonder if coal is a viable option moving into the future.

Brayton Point, the largest of the three in the deal, is routinely cited as being a major polluter in the New England region, according to the Washington Post. And with new ownership, some experts believe there’s no saving this coal giant – it’s just a matter of time until it finds itself in peril.

Midwestern Energy News reports Jonathan Peress, Conservation Law Foundation vice president, said in an e-mail:

“On an economic level, Brayton Point has fallen from a book value of approximately $1 billion from Dominion’s recent investment in the plant, to the equivalent of a heap of scrap metal. It appears that Dominion essentially gave away Brayton Point in order to prevent it from further weighing down its balance sheet.”

If experts truly see coal production and power stations like Brayton Point as such a hindrance, one might wonder why in the world Energy Capital Partners would want to make that kind of investment.

Here at home in the United States, coal may be a thing of yesteryear, but the answer is simple: there’s a whole world out there, and much of it is run on coal.

One look beyond our borders shows that there are brand new coal-fired power plants springing up all around the globe – roughly 1,200 new operations are in pre-production as you read this in 59 different countries.

China and India are two world powers that are steeped in coal use. And then there are Russia, Turkey, Vietnam, and South Africa, who all are relying heavily on coal production for the future.

And these are just new, proposed ventures; it doesn’t include what is already operational.

So while there is absolutely no doubt that coal use is on the decline in the U.S., throughout the world the business of coal is booming, so much so that it might not be such a bad idea to keep a little on tap here in the U.S. of A.


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