The March decision by the Nuclear Regulatory Commission to renew the operating license at Constellation Energy’s Calvert Cliffs station set the wheels rolling on what is expected to be a busy renewal bandwagon (Table). While the decision itself was not a surprise, its implications for future generation trends are not yet clear.
A decision brief by Cambridge Energy Research Associates (CERA) analyzes the effects of license renewal and provides a glimpse of the nuclear future. Operating licenses for tens of thousands of MW of nuclear capacity will expire in the next 15 years if renewals are not obtained. NRC’s positive reaction to initial applications for renewal, therefore, has significant consequences.
Duke Energy’s three-unit Oconee Nuclear Plant recently became the second facility to have its operating license renewed by the Nuclear Regulatory Commission. Photo courtesy of Duke Energy.
In its review, CERA made several assertions regarding what would and would not change in light of the NRC ruling. The NRC decision is not expected to affect the following:
- Nuclear power plants continue to be held by the general public to a much tougher performance standard
On the other hand, CERA does expect changes in several areas as a result of the decision:
- With 20 years of new licensed life, reactor owners might decide on a discounted cash flow basis to undertake certain reactor repairs or upgrades that might have been seen as uneconomic.
- Additional sales of operating reactors and consolidation of nuclear operations will continue. Longer operating lives should increase both the attractiveness and resale value of nuclear assets.
- License renewal may help reactor owners retain the skilled workforce required to maintain reliable and economic operations.
Most operating nuclear units in the U.S. likely could meet the NRC requirements for license renewal. The cost to obtain license renewal will vary depending on the need for certain capital investments to meet regulatory requirements, but CERA pegs the cost at $10-20 million per reactor. The NRC is currently favorable disposed toward approving license renewal applications, but this could change as NRC Commissioners and staff change.
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CERA does not anticipate new U.S. orders for nuclear plants as a result of the NRC’s willingness to approve license renewals. The economic basis for continuing existing reactor operation is quite different from the economic basis for a new plant order. Confidence in the ability to recoup capital investments in a new unit cannot be justified in the current U.S. environment.
Long-term, the renewal of operating licenses for nuclear facilities is not expected to limit future growth of natural gas demand for power generation. Natural gas demand is being driven more by increases in overall generation and capital cost advantages than by displacement of existing capacity, be it nuclear or coal capacity. The availability of natural gas at a reasonable price is more likely to cap gas demand than extended operations of an aging nuclear fleet. Abundant gas supply at reasonable price will diminish the likelihood that license renewal options are exercised. Conversely, if gas supplies are constrained and prices go up, existing nuclear capacity could become more attractive and set the stage for extended operations at even more plants.
GRI Study Forecasts Rocky Road for Coal
Despite the fact that U.S. coal production increased during 1998, recent events have lead many to believe that the coal industry is facing a difficult period. Exports have fallen, natural gas has become the fuel of choice for almost all new generating units, and the Environmental Protection Agency has launched numerous initiatives that will raise the cost of using coal. A recent study by GRI and Hill & Associates, Coal Demand and Price Projection, examines these challenges in detail. It features an extensive analysis of the competitiveness of coal in the industrial and electric generation sectors, both of which are key markets for natural gas.
The study concludes that total coal demand by electric generation and industrial customers is expected to increase slowly from 980 million tons in 1998 to 1,123 million tons by 2015. After 2015, coal use is projected to decline to 1,101 million tons by 2020, due to the impact of stricter environmental regulations. The study also projects that the average real (1999$) FOB mine-mouth coal price will decline over the projection period. Real FOB price is projected to decline from $15.79 to $12.62 per ton between 1998 and 2020. The decline is due to continued improvement in productivity, lackluster demand growth, and an increase in the market share of low-cost Western coals.
“The key to the continued viability of coal as a fuel option has been productivity improvement,” said Kathy Nice, GRI principal energy analyst. “Coal-mine productivity has increased steadily since 1978, at 6.5 percent per year. While some in the coal industry believe that productivity improvement will slow sharply and will no longer be able to offset inflation, there has been virtually no evidence to support this view over the past 20 years. Improvements in technology and competitive market pressures are expected to continue to drive productivity higher.”
Among the study’s other key findings are:
- The availability of adequate coal supplies depends on the timely opening of new mines by producers. The last series of capacity expansions led to the development of surplus deliverability and low prices. Given this experience, producers may be unwilling to continue to expand capacity ahead of demand requirements. Future supply expansions are likely to be completed in a more measured fashion than in the past.
- In the near term, Western low-sulfur coal, primarily from the Power River Basin, is projected to increase its share of total U.S. coal production from 52 percent in 1998 to more than 55 percent by 2005 at the expense of Eastern coal supplies. Post-2005, Eastern coal is expected to regain some market share as more scrubbers are built, allowing increased consumption of higher-sulfur coal from North Appalachia and the Illinois Basin.
- The steps involved with working through major rail consolidations in the Western and Eastern U.S. have created some turmoil in transportation markets in recent years. In the short term, these problems have led to growing dissatisfaction with rail service. However, these mergers have also helped to keep transportation costs stable. There have been no significant increases in overall rail rates since the early 1980s. These productivity improvements are expected to continue and, as a result, rail rates are not anticipated to increase over the projection period, putting no upward pressure on delivered coal prices.
- The wild card in coal markets will continue to be environmental regulation. Environmental regulations are expected to require the coal industry to further reduce sulfur dioxide (SO2), nitrogen oxide (NOx) and fine particulate emissions. Calls for the regulation of mercury emissions (and other trace toxic materials) are expected to grow and, ultimately, there are likely to be limits on carbon emissions. While the final impacts of the anticipated regulations are unknown, they will put downward pressure on coal prices because capital investments will be required for coal to remain a viable fuel option.
- Demand for U.S. coal exports grew sharply starting in the late 1970s. However, export demand for coal has begun to decline in recent years due to growing environmental concerns in Europe, weak economic growth in Asia, and new low-cost international competitors. The decline in U.S. coal exports is expected to persist. Exports are projected to decline dramatically, from 78 to only 24 million tons between 1998 and 2020.
Centralia Plant, Mine Sold to Centralia
Owners of the 1,340 MW, coal-fired Centralia Power Plant and the adjacent Centralia Mine have completed the sale of the plant and mine to TransAlta for $554 million. TransAlta is an Alberta, Canada-based energy company. The sale concludes an auction process begun in 1998 when the Centralia consortium of eight Northwestern utilities decided to jointly sell the plant. PacifiCorp has operated the plant on behalf of the consortium since it first went into operation in 1971.
“The Centralia Plant and Mine now has a clear future as a merchant plant in the Pacific Northwest,” said Alan Richardson, PacifiCorp CEO. “That’s a very satisfying outcome from our perspective. One of our objectives was to find a buyer with a strong business plan that would carry the plant’s operations into the future.”
TransAlta has also agreed to continue with construction of $200 million of pollution controls designed to reduce SO2 emissions by 90 percent and to meet early requirements for reduction of NOx emissions.
PacifiCorp owned a 47.5 percent share of the Centralia Plant, and also owned and operated the adjacent Centralia Mine. Other consortium members were Avista Corp., 17.5 percent; Seattle City Light, Tacoma Power and Snohomish P.U.D., 8 percent each; Puget Sound Energy Inc., 7 percent; and Grays Harbor County P.U.D., 4 percent. Portland General Electric sold its 2.5 percent share to Avista Energy in 1999.
Westinghouse Completes ABB Nuclear Business Acquisition
BNFL’s Westinghouse Electric Co. has completed the $485 million acquisition of the commercial nuclear power businesses of ABB. The company also confirmed that the ABB businesses would be integrated into and operated as part of Westinghouse.
“Closure of this deal is a major step forward for BNFL in its aim of becoming the leading global nuclear company. Combining ABB and Westinghouse business with our U.K. fuel business will create a major international player at the front end of the nuclear business,” said Norman Askew, BNFL Chief Executive.
“The combination of our companies’ new plant designs will position us well in those areas of the world where new nuclear construction is already planned and in other areas that will be interested in new plants when the nuclear option returns,” said Charles W. Pryor, Jr., Westinghouse president and CEO.
Integration of ABB’s nuclear businesses into Westinghouse is expected to be completed over the next 18 months. ABB product lines will be maintained.
Teledyne Unveils Minotaur Generator
The Minotaur 2500W remote power system.
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Teledyne Energy Systems recently announced the availability of the Minotaur 2500W series. The Minotaur is a compact, spark-ignition, prime-power generator for distributed power in off-grid locations. The Minotaur has a four-stroke, single-cylinder engine designed for a continuous-service life of up to 40,000 hours and a minimum routine maintenance interval of six months. It runs on natural gas and propane fuels.
“At 460 pounds, the Minotaur is readily transportable by vehicle or aircraft, and can be up and running with minimal site preparation,” said Jim Hawkins, Teledyne manager of Commercial Power products. “It can be remotely monitored and controlled through cellular technology, and it will soon have satellite communications capabilities.”
BEF Plans Wind Site
A new wind turbine will soon be generating clean electric power for the EPA under the terms of an agreement with the Bonneville Environmental Foundation (BEF).
The transaction, involving annual payments from EPA to the Foundation, will support the installation and operation of at least one new wind turbine in the region. The turbine will be rated at about 700 kW capacity.
BEF expects to obtain the wind energy from a new Bonneville Power Administration Northwest windfarm that will be developed by the end of 2001.
BEF is an independent non-profit foundation that generates revenues from marketing environmentally-preferred power to utilities and end-use customers throughout the four Northwest states.
PSEG Power Calls for Integrated Air Strategy
A mandatory, national program to cut power plant air pollution emissions is the best way to protect the nation’s air quality according to Frank Cassidy, PSEG Power LLC president and COO. Cassidy, appearing on behalf of PSEG and the Clean Energy Group before the Senate Environmental and Public Works Committee’s Subcommittee on Clean Air, Wetlands, Private Property and Nuclear Safety, testified that a national program should be enacted while the electric power industry makes the transition to competition. The Clean Energy Group includes Consolidated Edison Co., KeySpan Energy, Niagara Mohawk Power Corp., Northeast Utilities, PECO Energy, PG&E Generating Co., Sempra Energy and PSEG.
Cassidy called for adoption of an integrated air strategy that would provide energy companies regulatory certainty on which to base business strategy and investment decisions while delivering significant reductions in power plant emissions of NOx, SO2, CO2 and mercury.
The Clean Energy Group proposal calls for a mandatory, nationwide emissions caps for these pollutants; established dates for producing the necessary emissions reductions; implementation of the program through flexible, market-based mechanisms such as emissions banking and trading and credit for early reductions; and streamlining of the U.S. Environmental Protection Agency’s (EPA) New Source Review Process.
This approach, Cassidy said, will:
- Allow companies to coordinate emissions control strategies on a comprehensive, multi-pollutant basis and reduce the potential for stranded pollution control technologies investment.
- Deliver timely and necessary emissions reductions.
- Foster a fair competitive energy market.
- Encourage investment in new electric generating capacity that will reduce emissions and enhance electric system reliability.
“Enacting an integrated air emissions strategy as the electric power industry makes the transition to competition is essential to establishing a fair and competitive energy market and meeting national air quality objectives,” Cassidy said. He cited electric restructuring legislation (HR 2569), which would implement NOx, SO2, CO2 and mercury emissions caps, environmental disclosure requirements, and consumer protection measures, as an example of the growing recognition in Congress of the link between national energy and environmental policy.
Power Barge Heads to Guatemala
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A 124 MW power barge constructed at Cascade General’s Portland, Ore. shipyard, will begin providing reliable electric power to the Guatemala power grid this summer. The self-contained facility, powered by seven MAN B&W V-18 engines, is built on a deck barge 279 feet long and 104 feet wide. The power barge is owned by PQP Limited, a joint venture between Enron and Centrans Energy Services, a consortium of Guatemalen and foreign investors. Photo courtesy of Cascade General Inc.
Utilities File Suit Against EPA
In early May, AEP and the TVA separately filed suit in Federal court challenged EPA’s enforcement actions requiring older coal-fired plants to be updated with modern emissions control equipment. Both utilities assert that they have been in full compliance witht he New Source Review requirements of the Clean Air Act.
TVA believes the additional controls are unnecessary and could require a 14 percent electricity rate increase. AEP adds that the majority of the activities cited in EPA’s complaints occurred many years ago, some as early as 1979, well outside the five-year limitations period provided by the Clean Air Act.
Services Add Value To Electricity: EPRI
At least half of all U.S. electricity consumers are willing to buy electricity even at prices 30 to 40 percent higher than they currently pay, according to a new study from EPRI.
“The results of this research paint a fundamentally different picture of the marketplace than most industry commentators have described,” said Patricia Garber, lead researcher for the project. “Customers will pay more
Mass market customers have not been flocking to new energy providers, and many have already pulled out of the market. The EPRI study suggests, however, that retailers who are willing to break out of the box will succeed by meeting the wants and needs of their customers. Offers of energy service characterized by high-quality personal contact, involvement in the local community, customized billing and other valued services appear to be very attractive to customers, even at prices up to 40 percent higher than competing products.
Some business customers (20 to 30 percent) indicated a willingness to pay as much as 30 percent more for a premium power package guaranteeing minimum outages and minimum voltage fluctuations.
Approximately 1,200 residential customers and 3,000 business customers responded to the study, which was conducted in geographic areas that were completely regulated, partially deregulated, and completely unregulated. The business respondents included about 720 large commercial, 900 large industrial and 1,250 small business customers. A wide range of energy products and services were analyzed, including pricing and contract products, renewable energy products, variations in customer service levels and availability of value added products. The respondents were also asked about their interest in Internet services and about provider characteristics such as community involvement.
Ridge Energy Storage Targets CAES
Two Houston-based energy management and development firms, Ridge Group L.P. and Energy Storage & Grid Services Ltd., have formed a partnership, Ridge Energy Storage (RES), to develop, build and operate compressed air energy storage (CAES) projects in the U.S. and England.
RES plans to begin its first project by year-end 2000 with operation to begin in 2002. By year-end 2004, RES anticipates having up to seven plants totaling more than 2,000 MW in operation or under construction. RES has acquired exclusive rights to sites in the U.S. Gulf Coast and England for development of these projects.
A CAES plant uses electricity to compress air during off-peak periods. Electric motor-driven compressors store the air in an underground storage cavern, ideally located in a salt formation. When demand increases and/or prices rise, compressed air is recovered, heated and expanded from storage pressure to turbine inlet pressure. The air is then combined with natural gas and combusted in a modified gas turbine to produce electricity.
According to RES, storing energy in the form of high-pressure air has broad applications, is environmentally friendly and cost-effective. This process, using a modified gas turbine, enables RES to produce electricity with emissions reductions of more than 60 percent compared to comparably sized plants.
“While this technology has been operating for more than 20 years, it has not been widely employed in the United States,” said Dine Glasgow, Ridge Energy Storage CEO. “However, with today’s open and competitive wholesale electricity markets, we believe CAES offers electric generators significant competitive and operational advantages.”
Glasgow explained that because electricity cannot be readily stored, it is effectively produced and consumed simultaneously. The ability to compress air when electricity prices are low, store the air under pressure until prices rise, and then utilize the compressed air to produce electricity for sale, enables CAES to arbitrage between on-peak and off-peak electricity prices. CAES is also an enabling technology for ancillary services and the optimization of generation assets. Ancillary services help balance electrical supply and demand and maintain power quality.
ATCO Announces Scotford Facility
ATCO Power has announced construction of its sixth plant in Alberta
All power not used by the Upgrader will flow into the provincial power grid. Since electrical deregulation commenced in Alberta, ATCO Power has completed or started construction of five other independent projects capable of generating more than 750 MW.
New Wind Turbines For Pennsylvania
Two additional 65 kW wind turbines will be added by the end of summer at the Hazelton, Penn. wind site to meet customer demand for Pennsylvania Wind Energy. Community Energy markets “windblocks” of power to businesses in the Philadelphia area. The turbines will be the third and fourth turbines at the site. The first two went online in December 1999, and were the first commercial wind generators in the state.
Customer demand is driving the project expansion. More than 50 businesses have signed up to buy wind power from the project. The windblocks are 400 kWh monthly, and businesses select the number of blocks they want according to their energy needs. With competitive prices offered in partnership with Conectiv, businesses can purchase windblocks and still pay less overall than the current utility rate.
“Businesses are pleased to have a competitive choice that offers an economical way to bring new clean, emission-free wind technology to their community. It’s like taking a day to clean up your neighborhood. The results are worth the small investment,” said Brent Alderfer, Community Energy president.
Personnel and Promotions
Deborah Fiorito has been elected Dynegy Inc. senior vice president and chief communications officer. John U. Clarke has been re-assigned as executive vice president for retail, technology, strategic investments, telecommunications and branding. Robert D. Doty Jr. succeeds Clarke as CFO. R. Blake Young has been promoted to Dynegy Global Technology Services president.
Gregory Dolan has been appointed U.S. Fuel Cell Council deputy director.
Carl Schopfer has been named Catalytica Inc. senior vice president of engineering.
Kirk Spitzer has been appointed president of Alfa Laval USA, which has consolidated its separation, thermal and flow businesses into one operating company.
M.L. (Lee) Miller has re-joined the U.S. Operations of Sandwell Engineering Inc. as the manager of electrical and process control.
Thomas D. Tarnok has been named president and CEO of GEA Power Coling Systems Inc.
William R. Campbell has joined Entergy Operations as engineering vice president for its nuclear units in Arkansas, Mississippi and Louisiana. Campbell replaces Fred Titus, who is retiring at the end of the year.
Robert Ballard has been named a senior vice president at PB Power Inc., the U.S.-based power engineering subsidiary of Parsons Brinckerhoff. Ballard will manage the firm’s New York operations.
Lorrie Norrington is the new president and CEO of GE Fanuc Automation, replacing Joe Hogan, who has joined GE’s Medical Systems group.
Christian Maurin has been elected chairman and CEO of Nalco Chemical Co. Steve Newlin, company president, has been named to the additional positions of vice chairman of the board and COO.
Herbert L. Henkel has been elected chairman of Ingersoll-Rand Co., replacing James E. Perrella, who has retired.
Steve Buckman has been elected CEO and president of Bulab Holdings Inc., parent company of Buckman Laboratories, replacing Bob Buckman, who has retired.
John Gaskell has been appointed group managing director of energy businesses for Rolls-Royce plc.
Contracts and Construction
PG&E Corporation’s National Energy Group has broken ground on the 1,048 MW La Paloma Generation Plant. The plant, which is planned for commercial operation in the summer of 2001, will be the largest ever built in California specifically to compete in the state’s wholesale competitive power market.
Peoples Energy Corp. and Enron North America Corp. have announced an agreement to jointly develop a portfolio of at least 800 MW of new, natural gas-fired capacity in the Chicago area.
Foster Wheeler Energy Corp. has received a contract to supply three heat recovery steam generators for the 815 MW Red Oak power project in Sayreville, N.J. Red Oak is owned by a subsidiary of AES Corp. and will come on-line in December 2001.
Cogentrix Energy Inc. and Avista Power have broken ground on the $150 million Rathdrum Power Project in Idaho. Commercial operation is scheduled for mid-year 2001.
Kinder Morgan and Southern Energy will build a 550 MW power plant southeast of Little Rock, Ark., to come on-line by April 2002. The plant is the first in a series of power plants that Kinder Morgan plans to build using its proprietary Orion configuration, which combines the operational flexibility and responsiveness of a simple-cycle peaking plant with the fuel efficiency of combined-cycle technology.
AEP Contracts For Columbia Project
AEP Pro Serv Inc. has been awarded a contract by Columbia Electric Corp. for the engineering, design, construction and project management of a 500 MW power plant near Ceredo, W.Va.
Total cost of the six-unit, simple-cycle, natural gas-fired project is estimated at $140 million. Construction is expected to begin this summer. Commercial operation of the facility
is expected prior to the peak summer season in 2001.
The proposed plant will generate electricity for the East Central Area Reliability (ECAR) region. The facility will operate under a combination of contract and market sales.
The project will be situated on a 22-acre site adjacent to a natural gas compressor station operated by Columbia Gas Transmission in Ceredo.
Southern Energy Plans 830 MW Michigan Plant
Southern Energy Inc. recently announced plans to build an 830 MW plant in Zeeland, Mich. Construction of the natural gas-fired plant is already under way. The power station is scheduled to begin commercial operation in June 2001 with 300 MW of capacity. The additional 530 MW will begin commercial operation by June 2003.
Southern Company Energy Marketing will market the plant’s output in the wholesale power markets. The facility will use advanced natural gas, combined-cycle technology and state-of-the-art emission control equipment to maximize efficiency and environmental performance.
Semco Energy has received a contract to build a 7.5-mile, 16-inch natural gas line to serve the plant. Semco will own and operate the interconnecting line for a 12-year period.
The boards of directors of GRI (formerly Gas Research Institute) and the Institute of Gas Technology (IGT) have given final approval to a combination of the two organizations.
Niagara Mohawk Power Corp. sold its 400 MW Albany Steam Station to PSEG Power N.Y. LLC for $47.5 million. The facility is sited on the west shore of the Hudson River, about three miles south of Albany, N.Y.
Duquesne Light has completed the sale of its power generation facilities to Orion Power MidWest. The $1.7 billion dollar sale included seven generating plants with a combined capacity of 2,614 MW.
Deloitte Consulting, a leading e-business firm, and Npower, the integrated U.K. energy business of National Power plc, have announced a strategic alliance that seeks to increase power producers’ profits by reducing costs and improving products/services marketing. The alliance will target power generators around the world, providing integrated solutions from strategy to software.
The Public Utility Commission of Texas has approved the proposed merger between New Century Energies and Northern States Power to form Xcel Energy, wrapping up the last of nine required state approvals. The only approval remaining to be secured is from the Securities and Exchange Commission.
Pinnacle West Energy has reached an agreement to acquire about 1,300 MW of generation capacity from Southern California Edison. Included are SCE’s 16 percent interest in the Palo Verde Nuclear Generating Station and its 48 percent interest in Four Corners Units 4 and 5. Separately, AES Corp. has bought a controlling interest in the Mohave Generating Station, 56 percent from SCE and 14 percent from Nevada Power.
Alstom recently completed its acquisition of the 50 percent of ABB Alstom Power it did not own, renaming it Alstom Power.
Nuclear Management Co., formed by several utilities to oversee nuclear power plants in Wisconsin and Minnesota, has received Federal approval to operate the following facilities: Alliant Energy’s Duane Arnold Energy Center, Northern States Power’s Monticello and Prairie Island Plants, Wisconsin Electric’s Point Beach Plant, and the Kewaunee Nuclear Power Plant jointly owned by Wisconsin Public Service, Alliant Energy-Wisconsin Power & Light, and Madison Gas & Electric.
Western Resources Inc., whose merger with Kansas City Power & Light fell apart in January, is exploring a number of restructuring options, including a merger, sale or strategic alliance of its utilities, KPL and KGE.
Allegheny Energy Inc. and PPL Global have announced plans to purchase Potomac Electric’s 9.72 interest in the 1,711 MW coal-fired Conemaugh generation station near Johnstown, Penn. The transaction is subject to several approvals.
FuelCell Energy has completed one year of commercial design validation and endurance testing of a 250 kW Direct FuelCell power plant at its Danbury, Conn. headquarters. The demonstration, which began operation in February 1999, marked the largest and longest running (8,600 hours) carbonate fuel cell fuel stack ever.
Entergy Corp. and Koch Industries Inc. have established a joint company, Entergy-Koch LP, that will deliver, market and trade power, natural gas and other energy-related commodities, including weather derivatives. The company will trade volumes in excess of 100 million kWh of electricity annually and 5 Bcf daily.
GE Power Systems has agreed to acquire the turbine control retrofit business of Woodward Governor Co.
Reliant Energy has completed the acquisition of 21 power plants in Pennsylvania, Maryland and New Jersey from Sithe Energies. The 4,276 MW in capacity is fueled by coal (50 percent), oil/natural gas (46 percent) and water/hydro (4 percent).
Tenaska Inc. and Diamond Generating Corp., a wholly owned subsidiary of Mitsubishi Corp., have formed a new partnership, Tenaska Diamond, through which the companies will own four Tenaska power plants totaling 3,500 MW of capacity.
Allegheny Energy Solutions and Capstone Turbine Corp. have formed a strategic alliance whereby Allegheny Energy will become one of the leading system integrators for the Capstone MicroTurbine systems in the Northeast. As part of the alliance, a Capstone MicroTurbine was installed at the site of Allegheny Energy’s Mitchell Power Station in New Eagle, Penn.
BetzDearborn and Vivendi Water have extended their North America alliance to all other regions of the world. The companies will cooperate to sell Vivendi’s industrial outsourcing and equipment capabilities and BetzDearborn/Hercules’ water and proces treatment chemicals.