Coal, Gas

Slowdown Forces Developers to Reconsider Equipment Delivery

Issue 6 and Volume 106.

By Steve Blankinship,
Associate Editor

Little more than two years ago, power plant development was progressing at such a rapid rate that original equipment manufacturers had backlogs of orders and project developers considered themselves lucky to have equipment either on hand or in the production pipeline headed their way with promised delivery dates. With a significant number of cancellations and deferrals by developers, particularly in the non-regulated independent power producer segment, the quandary becomes what to do with equipment already being delivered but not immediately needed.

Calpine, the largest U.S. independent power producer, recently completed a significant restructuring of its gas and steam turbine purchase program resulting from agreements with its major turbine manufacturers, including GE Power Systems, Siemens Westinghouse and Toshiba, to defer or cancel existing turbine orders.

The first phase of the restructured turbine program includesagreements with GE, Siemens and Toshiba to adjust the timing ofdelivery and related payment schedules. With these agreements, Calpine has deferred the delivery and payment on 81turbines originally slated for delivery between 2002 and 2005.


Equipment to be stored routinely arrives by barge and heavy-duty rail at the Barnhart Heavy Lift Terminal at the Port of Memphis. Photo courtesy of Barnhart Crane and Rigging Company.
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Calpine will not incur any additional cash charges as a result of its revised turbine delivery and payment schedule.

In phase 2 of this program, Calpine has cancelled orders for 34 GE gas turbines and one GE steam turbine. As a result of this cancellation, Calpine will record a non-cash, pre-tax charge to earnings in the first quarter of 2002 of approximately $161 million, which includes financing costs to date. After netting the amount of Calpine’s turbine payments with GE’s cancellation fee, Calpine’s cash payment to effect the cancellation is immaterial. With its new turbine program in place, Calpine has 127 F-type gas turbines on order for delivery between 2002 and 2007.

Service providers such as Barnhart Crane & Rigging are among firms that offer another kind of solution with the ability to lift, transport and store major power plant components until they are needed. The Memphis, Tenn.-based firm has signed a contract with Mirant to transport and store generators, turbines, HRSG modules, and various other components at its facilities in Memphis.

“The power industry is in the middle of an unexpected construction slowdown caused by limited financial resources as a result of the Enron crisis and other economic factors,” says Barnhart project manager Art Porter. “The slowdown has resulted in power construction projects being put on hold throughout the country. However, some key power plant construction components have a long lead-time. In some cases, the project has been slowed down, but the equipment has already been manufactured, creating a need for storage.”

Barnhart has more than 150 acres of heavy laydown space and more than 700,000 square feet of indoor storage. Much of the cargo destined for power generation facilities arrives by heavy-duty railcar or barge on the inland waterways. Barnhart’s Heavy Lift Terminal at the Port of Memphis provides open, open-air warehouse and an enclosed warehouse. The facilities on the Mississippi River are accessible via rail, truck and barge and include more than 100 acres of storage and warehouses, and “Ichabod,” a 1,250-ton derrick.

The Mirant contract calls for Barnhart Crane & Rigging to transport and store a variety of power plant components ranging from duct sections to combustion turbine/generator units. “These components will be transported to several project sites for construction of power plants in 18 to 24 months,” says Porter.

“Pricing varies depending on size, volume and duration,” says Jeff Latture, senior vice president. “I can tell you that some companies are spending about $500,000 a year on power generation equipment storage.” He says his company is currently contracted to store about a dozen turbine/generators, balance of plant equipment on four units, and various steam drums, transformers and accessories for three other units.

The facility allows owners to receive, store and reload major equipment such as turbines, generators, HRSG modules and transformers. Some of the equipment requires special care for long-term storage. Services such as power supply for heaters, scheduled turning of generator rotors and others services are provide by Barnhart.

Barnhart also operates a terminal at the Port of Mobile where several turbine and generator sets are to be received for storage. Other companies have stored delayed equipment as well, including PanWestern, Texas Terminals and the Port of Houston.