But Dynegy Inc., the Houston-based independent power producer that is proposing to purchase the 1,151-megawatt Newton plant from current owner Ameren Corp., rejected Foresight’s offer in late September.
The Illinois Pollution Control Board could issue a ruling on the request as part of a broader decision expected in November on whether Dynegy will be given five additional years to comply with stricter state pollution controls at five coal-burning power plants, including Newton, it wants to acquire from Ameren.
Foresight Energy is asking the board to deny the waiver request, which also is opposed by environmentalists who have not formally dismissed Foresight’s outside-the-box offer to spend about $250 million to install a scrubber on Newton.
For years Newton, like most coal plants in Illinois, has burned low-sulfur Powder River Basin coal from Wyoming, even though coal production in Illinois lately has been on the rise. That is mainly due to Foresight, which operates four underground mines — three are longwall operations — in the Midwestern state.
“They seem to be the only operator who cares about the 55 million tons of coal that come into Illinois every year” from other coal basins, primarily the PRB, Phil Gonet, president of the Illinois Coal Association, said about Foresight. “It was certainly a bold move putting money on the table to put in a scrubber.”
Bold, perhaps, but not operationally or economically feasible, according to Dynegy. Dynegy’s analysis of Ameren’s power plants included evaluating the use of Illinois Basin (IB) coal, the company said, and it concluded that IB coal was not a viable alternative “from a commercial, operating and financial perspective.”
Newton, as do other Ameren plants, has existing PRB supply agreements that could not be easily replaced by Foresight, Dynegy said. “Today, more than $250 million has been spent on the construction of the Newton scrubber, and the engineering and design work did not contemplate the use of high-sulfur Illinois coal.”
Modifying scrubber designs “at this late juncture materially escalate the engineering and construction costs to complete the scrubber project and likely extends the timetable,” Dynegy added.
In testimony before the board, Foresight President and CEO Michael Beyer said the company’s offer would be good for Illinois both environmentally and economically. The state would not have to wait as long to reap the benefits of lower emission levels as a result of the new scrubber. And, more jobs would be created in Illinois, he added.
Foresight’s analysis shows that even with a purchase contract covering the cost of the scrubber, the delivered cost of the company’s coal “could well be lower than the current delivered cost and the current market price of imported Wyoming coal,” Beyer said in his prepared testimony. “Alternatively, Foresight Energy would be willing to assume Dynegy’s role in the proposed acquisition, acquire the assets as structured and construct the scrubber.”
Foresight bills itself as the lowest-cost producer in the IB. The company’s Illinois mines include Mach Mining No. 1, also known as Pond Creek; M-Class Mining’s MC No. 1 mine; Hillsboro Mining’s Deer Run mine; and the Shay No. 1 mine. All are longwall operations except Shay. The mines are expected to produce about 20 million tons this year, and Foresight said they have a potential annual capacity of up to 71.5 million tons.
St. Louis-based Ameren, meanwhile, said Foresight was not a participant in the process that led to Dynegy’s agreement to acquire the power plants.
Both Ameren and Dynegy have indicated that if the board rejects the waiver, the power plants likely will close. Ameren was given a waiver by the board last year. It subsequently entered into the plant acquisition arrangement with Dynegy. In June, the board turned down a request to transfer the waiver to Dynegy. The companies