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Posted at 4:12 PM ET, 09/ 9/2010

Is financing delaying a Va. coal-fired power plant?

By Peter Galuszka

The decision by a Henrico County-based electric cooperative to delay a controversial $6 billion coal-fired generating station in Surry County raises questions about whether such monsters can be financed.

Old Dominion Electric Cooperative had been on a roll, snagging permits and a rezoning ordinance to build its plant in the tiny village of Dendron, about 20 miles or so from Colonial Williamsburg.

On Sept. 8, Old Dominion announced it was "extending its timeline" for building the 1,500-megawatt plant because "slower than expected growth in the economy" means less demand for electricity. Not to fear, said a spokesman for the cooperative; electricity demand will revive, and the delay of up to two years doesn't change the cooperative's goal.

But Old Dominion's announcement seems a bit disingenuous. Could it be that it can't line up the financing?

Already, consultants have questioned the need for the project and how anxious lending institutions would be to shell out billions. Old Dominion spokesmen turned aside the concerns. Other worries remain about how much mercury the plant would emit into the Chesapeake Bay watershed and how it would affect global warming.

Unlike Dominion Virginia Power, which has two nuclear stations, a number of coal-fired and gas-fired plants and hydroelectric facilities, ODEC has never built an electric power station of this size by itself. Its members are a mix of small, rural co-ops from Delaware to Virginia. Its biggest and most urban member, the Northern Virginia Electric Cooperative, left Old Dominion in 2008 in a contract dispute.

One wonders why ODEC needs such a big slug of power. It could be that the cooperative needed to partner with another utility to get loans but failed to do so. There's no question that enterprises that easily pass the viability test have a hard time getting loans after the big banks like Merrill Lynch, Wachovia and Bank of America got greedy with dangerous but highly profitable subprime mortgage lending and derivatives.

Experienced plant builders and operators such as Dominion Virginia Power need either special financial deals through state legislation, as was the case with the much smaller Wise County coal-fired plant, or federal financial help. Plans to build another nuclear unit at North Anna won't fly without massive federal loan guarantees.

With obstacles like these, it's a wonder ODEC's plan has survived as long as it has.

Peter Galuszka blogs at Bacon's Rebellion . The Local Blog Network is a group of bloggers from around the D.C. region who have agreed to make regular contributions to All Opinions Are Local.

By Peter Galuszka  | September 9, 2010; 4:12 PM ET
Categories:  Chesapeake Bay, HotTopic, Local blog network, Virginia, development, economy, energy, environment, public health, real estate, recreation, weather, wildlife  
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Comments

Excellent article, Peter. Whatever their public statements imply, ODEC's spin is rarely an expression of their actual intent. Two things to consider: 1. Finance is going to be a huge issue; ODEC serves as an operating arm for the cooperatives, but it does not have the final say. It is completely plausible that the cooperatives might be very wary of adding debt, especially given that the projected costs of this facility greatly exceed their net worth. 2. If they don't build what will they do with the properties that they purchased? The original investors of the Dendron property (Mussel Fork Farm, LLC) paid 3 million for the (almost) 3,000 acre parcel. ODEC paid around 12 million dollars for a portion of the entire parcel. They currently have the needed zoning (via Surry County) to possibly turn a portion of the property into a landfill for coal combustion waste (fly ash). This is just one possibility, granted. I, by no means, pretend to know what ODEC plans to do--I've just been privy to some of their public statements (statements that they usually retract when they are asked for more information).
I will point out that you are somewhat mistaken in one statement: ODEC has built a coal-fired power plant before--the Clover plant in Halifax County. They did not, however, construct this electric generating facility alone; their partner in this endeavor was Dominion Virginia Power. ODEC does NOT operate, at this moment, a single EGF--Dominion operates Clover.

Posted by: rangergirl | September 10, 2010 11:05 AM | Report abuse

Interesting thoughts, Peter.

I find ODEC's reasoning a bit disingenious also. And a rather alarming admission in light of the flyer they sent to local residents before the public hearings a few months ago, which states:

"Without additional generation capacity from Cypress Creek, Virginia will face a shortage of electricity in just a few years, causing high prices and possibly even rationing."

Rationing? And now there's not even enough demand to justify building the thing? In a few short months? Somebody's math must be way off.

Unfortunately local officials bought these scare-tactics as they prefaced every approval vote with, "Based on necessity..."

Whether it was deception or miscalculation, ODEC seems to have seriously missed the mark on this point.

The majority of Surry residents have seen through ODEC's nonsense for a long time. We're just happy they seem to be on their way out. Public records tell the tale of the local sentiment: NO COAL PLANT!

Posted by: encyclopediabrown | September 10, 2010 4:28 PM | Report abuse

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