Air Pollution Control Equipment Services, Coal

CMS backs out of Ill. power plant deal

8 May 2007 — According to the Associated Press, CMS Energy Corp. has bowed out as a partner with Peabody Energy in developing and running a planned $2.5-billion, coal-fired power plant in southern Illinois, saying it could not find enough customers to justify its investment.

AP reported that CMS Energy Corp. said in a Securities and Exchange Commission filing that it withdrew from the project last month “because, at this time, it does not meet our investment criteria, including the level of power purchase agreements for our share of output” from the proposed 1,600 MW plant.

“Without those contracts in place, we couldn’t make sure our return expectations could be met without higher-than-planned risks,” a CMS spokesman was quoted by the AP as saying.

It was not immediately clear how plans for the plant might be affected by the departure of CMS, whose subsidiary CMS Enterprises was to have been the Prairie State Energy Campus’ lead developer, construction chief and operator of the power plant.

Prairie State plans call for the plant as well as a new coal mine nearby to supply it. CMS and Peabody each were to own 15 percent of Prairie State through a shared limited liability company, with other stakes held by various Midwest utilities and cooperatives.

“We’re confident the project will move forward,” Holyfield said.

AP reported that Peabody Energy issued a statement expressing appreciation for CMS’ interest in Prairie State, saying it “always expected a certain ebb and flow to the project.” Peabody said it continues to refine the project’s engineering and design and plans to announce additional milestones. CMS’ regulatory filing did not specify terms CMS sought from would-be customers or whether the company had to compensate Peabody for backing out of the deal.

“That’s all confidential,” Holyfield said.

The plant would be fueled by six million tons of coal expected from a new Lively Grove Mine; electricity would be distributed through the Ill. power grid and transmitted to Midwest communities and other energy suppliers.

AP reports that Peabody has said more than half of the plant’s output from its dual 800 MW units has been spoken for by a consortium of six Midwest utilities.

The company has said it expects the project to create 450 permanent jobs and pump some $100 million into the local economy each year.

Prairie State, which Ill. Gov. Rod Blagojevich has called the biggest private capital project ever planned for southern Ill., has been hailed as a milestone in helping revive Ill.’s ailing coal fields, which in previous decades were overlooked in favor of cleaner-burning Western coal.

But environmental and public health groups have argued that the plant would pose a health risk and diminish visibility in southeast Mo.’s Mingo National Wildlife Refuge by releasing sulfur dioxide, mercury and other pollutants into the air.

According to AP, Peabody spokeswoman Beth Sutton said the new plant will have advanced pollution controls, including scrubbers that will remove 99.9 percent of fine particles, and 98 percent of sulfur dioxide, a pollutant that contributes to fine particles.

The Sierra Club’s Midwest Clean Energy Campaign has countered that the project still would worsen existing pollution.

Prairie State has all major permits necessary to begin construction. Peabody last fall began building the infrastructure at the plant’s site, though no ground actually has been broken yet for the plant itself.

AP reported that Peabody has said construction would take about four years.