In the News

CPV In the News -2009

Platts EDP
July 08, 2009
CPV wants Md. PSC to order utilities to buy plant's power

Platts (2009) - Electric Power Daily
A Division of The McGraw-Hill Companies, Inc.
All rights reserved. Reprinted with permission.

Competitive Power Ventures said it cannot build a previously approved 640-MW natural gas-fired plant in Maryland unless the project has one or more long-term contracts to support it.

The company asked the Maryland Public Service Commission on Monday to order at least one of the state's investor-owned utilities to buy power from its proposed $500 million plant in St. Charles County under a 20-year contract. Under the company's request, the utilities would be required to sign the long-term contracts within 60 days of the order or the PSC would negotiate the contract on the utility's behalf.

The project will not be able to get financing without long-term contracts, the company said. "This simply is a fact under both current and reasonably foreseeable economic conditions resulting not only from the increasingly rigorous finance conditions placed upon large capital projects, but the nature of the PJM Interconnection market structure as well," the company said in it's request.

More than 3,000 MW of new generation has been approved by the Maryland PSC in recent years, but only 200 MW have been built, Braith Kelly, a company spokesman said. An industry observer who asked not to be quoted by name said requiring long-term contracts is probably the only way to get new generation built in Maryland.

The financial markets are not strong enough to finance new generation projects without the revenue streams from long-term contracts to lower the risk, Kelly said. "The markets are just not willing to take on that risk," he said.

At the same time, PJM's capacity payment is set in such a way it does not encourage new construction, Kelly said. "If it had a bifurcated payment system, one for new generation and one for older generation, developers would be more comfortable with the payment stream," he said. As it is now, the single payment offered for both existing generation and new generation is not enough to support new projects, he said.

PJM's reliability pricing model is not getting plants built because new construction needs a longer revenue streams than the six or seven years offered by PJM, Sue Kelly, general counsel for the American Public Power Association, said in an interview. "It's a financing fact after last year's economic meltdown," she said. Kelly said all options should be kept on the table, and long-term contracts are needed to anchor needed additional resources, she said.

Pepco, which serves customers in Maryland, said there is an active market in PJM, so there is no reason CPV cannot sell the power from the plant to PJM. "We're certainly not interested in a long-term contract," Bob Dobkin, a spokesman, said. BGE did not return a request for comment on the possibility of being required to sign a long-term contract.

Connecticut has had great success by requiring long-term contracts, CPV's Kelly said. "If the industry is going to survive there has to be more such forward thinking,"
he said.

Pennsylvania regulators have required utilities to stabilize rates by requiring a mixture of long-term, short-term and spot market contracts.

Privately held CPV said it would open its books to public review to show the reasonableness of its terms and pricing. The company would bear the risk of cost overruns, Kelly said.

The new plant would reduce rates and rate volatility while reducing the state's "alarming" reliance on out-of state resources, CPV's Kelly said. APPA's Kelly said there are limited options to bring down the price of power. "But with a dedicated plant at a known price, there might be a place in a portfolio for that," she said.

CPV asked for expedited consideration of the request, with an order issued within 30 days.

The project is in the advanced stages of development, the company said. It received a final certificate of public convenience and necessity on November 8 and an Army Corps of Engineers permit on January 16. To meet a 2012 online date, it needs to begin construction right away. CPV expects to receive remaining federal, state and local approvals shortly. -- Mary Powers

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Ethanol Producer
June 09, 2009

Hereford Biofuels ethanol plant to be 'mothballed'

by Ryan C. Christiansen From the July 2009 Issue of Ethanol Producers Magazine

Report posted June 9, 2009, at 4:55 p.m. CST

Competitive Power Ventures Holdings LLC, a North American power industry development and asset management company headquartered in Silver Spring, Md., announced it has been retained by Ethanol Acquisition LLC, a group of lenders led by French financial services giant Société Générale Group, to manage the former 115 MMgy Hereford Biofuels LP ethanol plant in Hereford, Texas, which Ethanol Acquisition acquired in April from Panda Ethanol Inc. for a $25 million credit bid in bankruptcy court.

CVP said it will assist Ethanol Acquisition with closing the deal to acquire the plant and will oversee transitioning the plant to "mothball" status and with liquidating physical commodity positions.

"Our objective is to properly maintain and preserve the facility in anticipation of a future startup or eventual sale," said Dave Magill, senior vice president of asset management for CPV. "Obviously, operating margins are currently tight, but we believe that the Hereford plant has unique technological and geographical advantages that will make the plant a valuable asset within the biofuel industry."

The Hereford Biofuels plant was destined to be a unique operation in the self-proclaimed "Beef Capital of the World" of Hereford, fueled by cow manure from nearby feedlots and supplying wet distillers grains with solubles to the cattle there. According to the Deaf Smith County Chamber of Commerce in Hereford, there are approximately 1.5 million fed cattle within a 30-mile radius of Hereford.

PR Newswire
May 26, 2009

Capacitor Bank Project Improves Power Delivery to New York City

ATHENS, N.Y., May 26 /PRNewswire/ -- New Athens Generating Company ("NAGC"), working with the cooperation of Consolidated Edison Company of New York, Inc. ("Con Edison"), has completed the installation of capacitors at a Con Edison substation in Westchester County, New York.

The capacitors are part of a project that enhances the delivery of power over the electrical system from the generating stations in the Albany area to New York City. NAGC and upstate utility National Grid have also upgraded relay equipment in 2008 in conjunction with this overall project.

Typically, during hot summer days when power is needed most, the Capital Region generating stations are curtailed since increased congestion on the system reduces the amount of energy transfers from upstate New York, including those in the Capital Region, to the New York City area during the high power demand operating periods.

The overall project with the installed capacitors and relays will help alleviate these curtailments. "These electrical system upgrades will continue to ensure diversified reliable power in New York that benefits both consumers throughout New York and the power stations in the Capital Region," said Ned Kleinschmidt, Chief Executive Officer of NAGC and MACH Gen LLC, a privately held company with over 2,500 megawatts (MW) of gas-fired generation throughout the United States.

NAGC, a subsidiary of MACH Gen, owns a 1,080 MW state-of-the-art gas fired power station in Athens, New York that has been operational since 2004. The facility is managed by Competitive Power Ventures, Inc. and operated by NAES Corporation.

SOURCE New Athens Generating Company

The Sacramento Bee
May 24, 2009
Colusa power plant shows importance of fossil fuels

By Jim Downing
Published: Sunday, May. 24, 2009 - 12:00 am | Page 1D
The Capitol may be buzzing about renewable energy, but 70 miles up Interstate 5, the biggest thing going is a new Pacific Gas and Electric Co. power plant that will run on natural gas.

In Colusa County, which routinely has the state's highest unemployment rate, officials are looking to the billion-dollar project as a bit of an economic balm. As many as 650 construction workers will build the plant – though most will come from outside the county. Taxes on the project should give a nearly 10 percent boost to the county's general fund.

"There's never been any single thing of this magnitude – and there may never be again," said county supervisor Gary Evans, whose family moved to the area in 1868.

The 660-megawatt project also shows how important fossil fuels remain to the electricity sector, even in a state with the nation's boldest commitment to develop renewable power and cut greenhouse-gas emissions.

Despite California's nation-leading energy-efficiency programs, overall power demand continues to grow. After a lull in power-plant openings in the state for the past two years, in 2009 a projected 2.2 gigawatts of new gas power will fire up – more than all the solar, wind and other renewable power capacity built in the state over the past six years.

The Colusa plant, big enough to serve roughly 500,000 homes, is scheduled to begin operating late next year. State regulators are reviewing applications for major new plants near Vacaville and Lodi as well.

To be sure, the Colusa project is about as clean and efficient as fossil fuel-based electricity gets. The plant captures waste heat from its gas turbines and uses it to generate power. It uses 97 percent less water than many older units, PG&E said.

And even in a future dominated by renewable power, some fossil fuel-fired plants will be needed to provide the reliable, on-demand juice needed to keep the grid running smoothly. Better those plants be as clean and modern as possible, renewable-power advocates say.

"A gas-fired plant … is a plausible part of a green-technology portfolio," said Ralph Cavanagh, energy program co-director at the Natural Resources Defense Council. "We don't want to give a free pass to the dirty old plants, and if we stop building cleaner new generation, we run the risk of doing exactly that."

A 2002 law established California's renewable-energy targets. By 2010, PG&E and the state's other two big private utilities are supposed to get 20 percent of all their electricity from renewable sources – chiefly solar, wind, geothermal, biomass and small-scale hydroelectric. Public power providers like the Sacramento Municipal Utility District generally have an extra year or two to meet the goal.

Bills now in the Legislature would mandate a steep increase in renewable power through the next decade – to 33 percent of all the state's power by 2020.

For now, though, the state's big utilities, and many of the smaller ones as well, are likely to be several years late meeting their 20 percent goal.

It wasn't until last year that renewable power projects started to come online in significant numbers. And now the bad economy has squeezed financing. It has proved difficult to build new transmission lines and get permits for large-scale renewable projects, such as giant solar power plants in the Southern California deserts.

In 2008, the state got 13.5 percent of its power from renewables, compared with 11 percent in 2002, according to the California Energy Commission.

PG&E and the other private utilities could face fines of $25 million annually for missing the 2010 deadline. But the enforcement process is complex and penalties stand to be delayed for several years.

Environmental groups say it's important to keep the pressure on utilities to meet their obligations, but they generally aren't fussing over the slow progress.

"It's just a matter of getting the projects built," said Laura Wisland, energy analyst with the Union of Concerned Scientists. That's not likely to happen, though, until several years after the deadline, she said.

It's easy to see the site from Interstate 5, a few miles north of Maxwell.

From a village of office trailers, the project sprawls over 100 acres of former cow pasture. While about 450 people are on the job now, Colusa officials aren't counting on the project to have a big impact on the county's chronically high unemployment, which stood at 19.1 percent in April, tied for second highest in the state.

Once finished, the power plant will be staffed by only about 30 people. Even during the bustle of construction, most of the skilled blue-collar jobs – precision welding, for instance – are going to outside workers. It's a union project, and few qualified journeymen live in the county.

Still, local businesses say they are benefiting from the project.

Construction workers have boosted business 20 percent at the Maxwell Inn, a restaurant and banquet hall, said manager Betty Luiz.

"They support our bar very well," she said.

PG&E is giving preference to local companies for contracts on everything from office supplies to maintaining the air conditioners at the project site. At least one parts-supply shop opened to serve the project. A specialty pipe fabricator with a staff of 25 counts the power plant as its main customer. Mark Mulliner, who runs the pipe shop, said he's hoping for a few more years of good business from the next big power project – a 660-megawatt plant planned for the Vacaville area.

Local officials tie the county's high rate of joblessness to the instability of work in agriculture, the county's biggest employer, and to a string of mill and factory closings.

Don Schjeldahl, a consultant hired recently by local officials hoping to attract companies to the region, gave the county poor marks on everything from low job skills to a lack of good business and industrial sites.

But there's potential for improvement, Schjeldahl said, particularly if the county is clever about what it does with the tax revenue it's going to get from PG&E.

Investments in basic infrastructure, job training and at least one paid economic-development staffer could help diversify the local job base over the long run, he said. Sticking to that kind of long-term plan could be difficult, though, given the everyday demands on county finances.

Platts EDP
April 29, 2009
Developer says PPAs vital for financing in New England (April 29, 2009)

Platts (2009) - Electric Power Daily
A Division of The McGraw-Hill Companies, Inc.
All rights reserved. Reprinted with permission.

Citing what he says are extreme price fluctuations in Northeastern capacity markets, the CEO of a leading power plant developer believes that power purchase agreements are vital in order to obtain financing for new electric generation projects in the region.

"The one thing that is very clear in this market is the fact that you are going to need a PPA," said Doug Egan, CEO of Competitive Power Ventures, a developer of natural gas-fired and wind generation projects.

Northeastern capacity markets "just fall way short" of what is needed to get financing in the current financial environment, he said. Capacity prices are insufficient, the amount of time given for repayment is too short, and "wild fluctuations" in capacity prices in the Northeastern capacity markets make them "totally unreliable" in terms of financing, he said.

"If you are going to have a prayer for a deal in these markets, it's really going to be PPA-based," said Egan, speaking at Platts' Northeast Power Markets Forum in Washington.

The recession following the financial crisis has pretty much flattened demand growth in the Northeast, he said. But history shows that when a bad economy turns around and starts gaining, electricity load not only grows, it actually catches up to the growth curve it had been on previously, he said.

"We need to think about what the [independent system operators] are doing in that light," he said, adding that the PJM Interconnection seems to be focusing on "coal by wire" from the Ohio River Basin to the East Coast. These transmission projects are frequently controversial, but lines are getting built, he said.

The New York Independent System Operator and ISO New England are aggressively increasing their reliance on demand response, according to Egan. In New York, demand response represents close to 4% of supply, and in New England it is approaching 6%, he said. But since demand response providers sometimes do not respond to calls to reduce their load, some of that supply is not so reliable, he said.

Depending on load growth, the duration of the recession, the siting of new transmission projects and the use of demand response, new generation for East Coast load centers could be needed as early as 2011 or as late as 2016, he said. Given that generation takes years to gain approval and be built, "the time to think about new generation is now," he said.

The universe of power project financers has shrunk, but there are still eight to 10 commercial lenders interested in financing generation, and a handful of "institutional lenders," such as hedge funds and consortiums. The cost of debt and private equity is going up, he said.

In terms of financing transmission in the Northeast, Citigroup power sector specialist John Clapp said that Federal Energy Regulatory Commission incentive rates, as well as regional cost allocation in markets administered by regional transmission organizations, make transmission projects relatively low-risk investments. Looking at transmission proposals springing up around the country, "a lot of that has truly been unlocked by the kinds of incentives that FERC has provided," Clapp said.

"We have had a real effort around transmission for several years, ever since FERC introduced its transmission incentives...," Clapp said. "Once you get over the siting risk, these are relatively low-risk projects."

In RTO-administered markets such as PJM, regional allocation of transmission project costs make financing projects in RTOs relatively easy, he said. "You're really taking, in many cases, PJM credit risk, and not the credit risk of a single counterparty," Clapp said.

"It's relatively easy to do these kinds of transactions. Again, the pricing and other components of this are going to be different today, but transmission is a safe haven-type of investment in the current market," Clapp said.

He said he expects to see more of these kinds of projects in upcoming months, he said.

-- Jason Fordney

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