Baltimore-based Constellation Energy, one of the U.S. utilities hoping to build new domestic nuclear capacity, the nation’s largest wholesale power supplier and owner of Baltimore Gas and Electric, is set to be acquired by Berkshire Hathaway’s MidAmerican Energy Holdings.
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MidAmerican’s holdings include Pacific Power, Rocky Mountain Power, PacifiCorp and CalEnergy. MidAmerican Energy agreed to pay $4.7 billion in cash and stock for Constellation. The deal must be approved by shareholders, state and federal authorities. MidAmerican and Constellation expect the deal to close within nine to 12 months. Berkshire Hathaway is controlled by Warren Buffett.
The September merger announcement came after a two-day, 60 percent stock plunge reportedly due to Constellation’s financial ties to investment bank Lehman Brothers Holdings. Before Lehman filed for Chapter 11 bankruptcy on Sept. 15 it was the fourth-largest investment bank in the U.S. Later that same week, MidAmerican Energy, based in Des Moines, Iowa, announced an agreement to buy Constellation.
The MidAmerican acquisition was complicated by a competing offer from French nuclear power provider Electricite de France (EdF). The French company already owns 9.51 percent of Constellation, a stake tied to plans to build new nuclear units in the U.S. EdF and Constellation are also joined through UniStar Nuclear, a 50-50 joint business venture that hopes to build four next-generation nuclear reactors in the United States.
Following news of the MidAmerican bid, EdF called a meeting with its board to consider trumping the deal. EdF earlier this summer had raised its stake in Constellation, making it the utility’s largest single shareholder. EdF countered MidAmerican’s $26.50 per share offer with an offer of $35, but that bid was all but ignored by Constellation management.
EdF would likely face regulatory hurdles in any attempt to acquire Constellation. The U.S. Atomic Energy Act bans foreign ownership and control of any nuclear reactor. British Energy was allowed to buy a stake in some U.S. reactors because it formed a joint venture in 1997 with Philadelphia-based Peco Energy, which later joined Exelon Corp. of Chicago to become the largest U.S. nuclear operator. Regulators decided that because Exelon was the owner-operator and Americans controlled the company, such an ownership arrangement was acceptable. But sorting through so many issues would take a lot of time and time seemingly was not on Constellation’s side given its need for cash.
(As part of its overall strategy to build new nuclear plants in the UK as well as in the U.S., EdF bid to acquire British Energy in September. By taking over British Energy, EdF would win control of eight British nuclear plant sites with potential for building new reactors. EdF currently owns 58 nuclear plants that produce 80 percent of France’s electricity, the highest percentage of nuclear power for any country in the world.)
At a press conference on September 22, Mayo Shattuck III, president, chairman and CEO of Constellation Energy said the company had been working to increase its liquidity in light of rising commodity prices.
“First, the Lehman/AIG collapse raised our potential exposure to financial counterparties,” he said. “Then, in mid-September, our stock prices took violent hits that impacted confidence around our liquidity.”
Constellation sought a strategic partner that could provide liquidity immediately. On September 22 soon after a definitive merger agreement was signed, $1 billion was wired to the Baltimore company in the form of preferred stock yielding 8 percent to MidAmerican.
“We were fortunate in having Berkshire Hathaway and MidAmerican able to provide immediate liquidity such that we didn’t threaten the ability to continue our commercial operation,” said Shattuck. He said there were no market power issues with MidAmerican and that the deal also would provide the best probability for state and federal regulatory approval. He said the acquisition enables Constellation to continue to pursue its strategic plans for customers, employees and the nuclear industry.
MidAmerican would appear to be getting a lot for its money. If approved, the merger would net it a company that rankgs among the Fortune Top 125 with $21 billion in revenues in 2007. In addition to being one of the largest player in competitive power markets in the U.S., Constellation owns 83 generating units across the country with a total of 9,000 MW of capacity. Perhaps more strategically, five of the units are nuclear. They alone generated more than 60 percent of the power Constellation Energy produced in 2007.
Maryland state regulators could prove to be the biggest hurdle to the deal. Constellation earlier tried to sell to FPL Group in Florida for $12.4 billion, more than double the selling price to MidAmerican. But two years ago, FPL and Constellation abandoned their merger plans after executives concluded the deal was hopelessly mired in a political debate over deregulation and rising electricity rates in Maryland.
A replay of the earlier dischord is not out of the question. Maryland Del. Patrick McDonough, a Republican representing Baltimore and Harford counties, and member of the House Judiciary Committee, asked Maryland Attorney General Douglas Gansler last month to investigate senior management practices at Constellation and sale of the company.—Steve Blankinship
Name Games Muddy the Water
It isn’t easy being green. So said Kermit the Frog. And it’s especially true if no one can agree on what “green” means, let alone “alternative”, “renewable” and “sustainable.”
Manufacturers, politicians, journalists and environmental groups use all four words somewhat interchangeably in the context of energy. While the casual listener may fail to discern the differences, those using the terms rarely define them, keeping things in a state of confusion and even misinformation.
FPL Group is trying to get Florida politicians and regulators to view new nuclear power as “renewable.” Although FPL’s parent company is the largest developer of wind capacity in the United States, the southeastern states (including Florida) are not very windy places. FPL has already announced three solar plants with a total generating capacity of 110 MW that are scheduled for completion within the next several years. New nuclear units proposed for the state’s Turkey Point site would produce 20 times that amount and do it 24/7.
The utility insists the best way to cut greenhouse gases is to define nuclear as a renewable source. FPL told regulators that doing so can speed the state’s push to combat global warming by having 20 percent of all power come from renewable energy sources by 2030, rather than 2050, the timeframe currently discussed by regulators.
Florida law defines renewables as including solar, geothermal, wind, ocean, waste, hydroelectric or biomass; the latter from burning garbage, plants or wood. Environmental groups have said they disagree with FPL’s efforts to have nuclear regarded as renewable. And many states differ from Florida by rejecting hydro as a “renewable” energy resource.
Nuclear power creates no emissions, making it green by some people’s definition. It also is an alternative to fossil fuels as a means to meet demand for new baseload generating capacity. And it is sustainable both in terms of how much uranium is available and how much energy can be recovered through the recycling of spent nuclear fuel, as the French do. Then there is thorium, another source of fissionable material yet to be tapped.
Patrick Moore said the two most renewable sources of energy in the world are wood and hydroelectric energy. Click here to enlarge image
Patrick Moore, a founder of Greenpeace, the sometimes-militant environmental group that has long opposed nuclear power, offered insight into the confusion. Moore broke with Greenpeace and today is pro-nuclear. With former Environmental Protection Agency Administrator Christine Todd Whitman, he is co-chair of the pro-nuclear Clean and Safe Energy Coalition.
Moore said the idea that nuclear is renewable is predicated on the fact that there is such a vast supply of potential fuel for nuclear, including uranium and someday thorium. Moore said he believes that the abundance of energy that nuclear could provide sets it apart from fossil fuel. As a result, nuclear should not be considered on such a limited basis as fossil. “There’s enough thorium to last perhaps thousands of years, so that puts it into a different category,” Moore said. “But I don’t think it (nuclear) can legitimately be called renewable in the sense that we understand it.”
Moore said he believes agricultural products (including trees) along with wind and hydro are also renewable resources. And he fails to see why renewable portfolio standards being adopted across the United States often exclude hydro. “The two most renewable sources of energy in the world are wood and hydroelectric energy. Wood is nearly three-fourths of the world’s renewable energy and hydro is nearly one-quarter. All the others put together don’t add up to one percent,” he said.
Moore said the environmental activist movement “including Greenpeace and all my old buddies” are largely opposed to cutting trees and building hydro dams and so end up being opposed to most of the world’s renewable energy sources. “If their point is that we should use renewable resources they should be strong promoters of using more wood and building more hydro dams,” Moore said. “The environmental policy should be grow more trees and use more wood.”
Although Moore may not see nuclear as renewable, he does see it as an alternative to fossil fuels and also sustainable.
“Sustainable and renewable are not the same thing, but they are very strongly related,” he said. For Moore, sustainable is just as good as renewable.
Moore said he doesn’t think nuclear advocates should twist the language and further confuse things. But he said he believes that when utilities don’t have access to some renewable technologies, such as hydro or wind, sustainable nuclear is the right alternative. Moore said that what FPL is really saying is that they need political support to consider nuclear as a kind of alternative energy rather than just being forced to compete with gas and coal.
But is renewable “green?” No, according to Jesse Ausubel of Rockefeller University writing in the International Journal of Nuclear Governance, Economy and Ecology. Ausubel explains that building enough wind farms, damming enough rivers and growing enough biomass to meet global energy demands will wreck the environment. He reached his conclusion after analyzing the amount of energy that each renewable source can produce in terms of output per square foot and compares the effects on nature those renewables have with the space nuclear requires.
“Nuclear energy is green,” he wrote, “and has astronomical advantages over its competitors.” He wrote that while technologies succeed due to economies of scale, no economies of scale benefit renewables because more renewable kilowatts require more land in a constant or even worsening ratio.
His calculations show that hydro, solar, wind and biomass all take up far greater land mass than nuclear while producing a fraction of the power needed by populations.
“Renewables may be renewable but they are not green,” wrote Ausubel. “If we want to minimize new structures and the rape of nature, nuclear energy is the best option.”—Steve Blankinship
Group Seeks $5 Billion for Texas Wind Energy Network
Six electric utilities and transmission companies planned to file a $4.93 billion proposal to build a roughly 2,400 mile transmission lines to ferry wind power in Texas.
The companies seek to build the 345 KV lines in the five competitive renewable energy zones established this year by the Public Utility Commission of Texas. Regulators created the zones to implement a 2005 state law, which aims to spur transmission line construction by identifying areas with potential for future wind farm development.
The new transmission lines could lead to about 18.5 GW of new wind power projects in the state’s central western region and the Panhandle, according to the regulatory commission.
Studies by the Electric Reliability Council of Texas (which the regulatory commission directed to identify and recommend locations for the transmission lines and estimate the amount of power that would be developed in those areas) came up with the scope of the transmission lines project and the nearly $5 billion estimated project cost.
The consortium includes Electric Transmission Texas, LCRA Transmission Services Corp., Oncor Electric Delivery, Sharyland Utilities, South Texas Electric Cooperative and Texas-New Mexico Power Co.
The companies will have to pay for building their part of the new network. Electric Transmission, for one, estimated that its share would cost as much as $1.7 billion. The consortium’s proposal will need final approval from the utility commission.
The electric-power industry would have to spend $60 billion on transmission lines to enable wind energy to make up 20 percent of the country’s power supply by 2030, according to the U.S. Department of Energy.
In many states, power companies have to share their transmission lines to promote competition, a mandate that offers little incentives for the companies to invest in new networks.—Jeff Postelwait
Demand for Engineers Growing
It’s a good time to be an engineer and a frustrating time for firms that need them. A surge in power plant construction and power project planning – in addition to the general need to build new infrastructure – is driving the market, and engineering students find themselves at the center of bidding wars for their talent.
Even in the current slow economy, engineers remain in high demand. And competition for them is escalating. Experienced engineers are the most sought-after. But with graduation rates among engineering disciplines down 20 percent over the past 20 years, there are simply not enough engineers to supply market demand for them. Recruiters are calling engineers at their offices to lure them away from their current jobs with bigger money and extra perks. And engineering firms are guaranteeing jobs to college students even before they start their senior years.
Perhaps nowhere is the competition more intense than in Charlotte, N.C., a major center of activity for three major power sector engineering firms, The Shaw Group, URS Washington Group and Fluor. According to the Charlotte Observer newspaper, about 10 percent of nuclear power engineering form AREVA Group’s U.S. employees are located in Charlotte with AREVA planning to add 200 to 250 additional engineers to its Charlotte office within the next four years.
Demand in the power sector includes the need for mechanical, computer, electrical and nuclear engineers to design, build and operate the next generation of nuclear plants as well as new technology power plants including wind, solar and biomass. And new on-site, distributed generation systems require special design, special cooling pipes and failsafe computer systems.
The biggest shortage may be among mid-career engineers with experience as project leaders. The current supply of engineers is either in their 20s or in their 60s, the newspaper suggested. Power industry firms suffered shortages during the dot-com boom, when many students with math and computer skills turned down engineering school and chased big salaries offered by the high-tech firms in the 1990s. As a result, between 1985 and 2001 the number of graduating students in the U.S. with engineering bachelor’s degrees dropped 25 percent.
Although the trend shows signs of new engineers turning back to traditional industries, the need for engineering skills in those sectors is growing faster than the new supply. The industry average annual starting salary for first-year engineers is around $50,000 and the U.S. Department of Labor forecasts 11 percent growth in the number of engineering jobs until 2016. That’s an addition of 160,000 engineers to the current workforce, which currently numbers about 1.5 million.
Baton Rouge, La.-based Shaw has an $8.2 billion backlog of energy-industry work. URS Washington Group opened a nuclear center in March in Fort Mill, S.C. It plans to hire several hundred engineers and other nuclear plant specialists. Both firms have also established scholarship programs at the University of North Carolina at Charlotte.—Steve Blankinship
New Carbon-Based Material for Energy Storage
Engineers and scientists at The University of Texas at Austin have achieved a breakthrough in using a one-atom thick structure called “graphene” as a new carbon-based material for storing electrical charge in ultracapacitor devices. The development could pave the way for massive installation of renewable energies such as wind and solar power.
The researchers believe their breakthrough shows promise that graphene (a form of carbon) could eventually double the capacity of existing ultracapacitors, which are manufactured using an entirely different form of carbon.
“Through such a device, electrical charge can be rapidly stored on the graphene sheets and released from them as well for the delivery of electrical current and, thus, electrical power,” said Rod Ruoff, a mechanical engineering professor and a physical chemist. “There are reasons to think that the ability to store electrical charge can be about double that of current commercially used materials.” The researchers are working to see if that prediction will be borne out in the laboratory.
Two main methods exist to store electrical energy: in rechargeable batteries and in ultracapacitors, which are becoming increasingly commercialized but are not yet as popularly known. An ultracapacitor can be used in a wide range of energy capture and storage applications and is used either by itself as the primary power source or in combination with batteries or fuel cells.
Ruoff and his team prepared chemically modified graphene material and, using several types of common electrolytes, have built and electrically tested graphene-based ultracapacitor cells. The amount of electrical charge stored per weight (called “specific capacitance”) of the graphene material is reported to already rival the values available in existing ultracapacitors. Modeling suggests the possibility of doubling the capacity.
The U.S. Department of Energy has said that an improved method for storage of electrical energy is one of the main challenges preventing the substantial installation of renewable energies such as wind and solar power. Storage is seen as vital for times when the wind doesn’t blow or the sun doesn’t shine. During those times, the stored electrical energy can be delivered through the electrical grid as needed.
“Electrical energy storage becomes a critical component when very large quantities of renewable electrical energy are being generated,” Ruoff said.—David Wagman
Patrick Moore said the two most renewable sources of energy in the world are wood and hydroelectric energy.
Mitsubishi Heavy Industries Ltd. (MHI) and Luminant agreed to form a joint venture to advance development of two potential new nuclear reactors at Luminant’s Comanche Peak facility in Texas. Luminant filed a combined license (COL) application with the Nuclear Regulatory Commission (NRC). The application is expected to request approval for an expansion of Luminant’s existing Comanche Peak Nuclear Power Plant, using MHI’s 1,700 MW, US-Advanced Pressurized Water Reactor (US-APWR) design. According to details of the joint venture, Luminant would retain an 88 percent ownership share and MHI a 12 percent stake. The joint venture is expected to continue development of the COL and fund project development costs during the period preceding issuance of the combined license. The joint venture’s closing is currently anticipated to occur prior to year end. Luminant and MHI will seek official support for financing from the U.S. and Japanese governments.
Detroit Edison officials submitted to the U.S. Nuclear Regulatory Commission (NRC) a combined license (COL) application for a possible new nuclear power plant at the site of the company’s existing nuclear plant near Newport, Mich. Detroit Edison maintains eligibility for a portion of $6 billion in federal tax credits should the plant be built. The license application is based on the GE Hitachi Nuclear Energy ESBWR (Economic, Simplified Boiling Water Reactor), an advanced-design boiling water reactor that produces about 1,500 MW. The NRC review could take up to four years.
The California Public Utilities Commission voted unanimously to oppose Proposition 7, a ballot measure that would order California utilities to procure half of their power from renewable resources by 2025. The CPUC opposed the measure largely because “it would establish an excessively rigid, and potentially unworkable, structure for the further development of renewable energy in California,” the agency said in a press release. The structure of the measure might hinder the state’s renewable energy goals, the CPUC said, by interfering with or delaying programs already under way. The measure would set higher targets for the state’s renewable portfolio standard. Electricity providers would have to meet targets of 40 percent of their electricity from renewable sources by 2020 and 50 percent by 2025.
Areva and Duke Energy announced the formation of Adage, a joint venture to develop biopower energy plants for the U.S. market. Adage will build power plants that use wood waste to produce electricity. According to the agreement, Areva will design and build biomass power plants. Duke Energy Generation Services , a business unit of Duke Energy that owns and develops renewable energy, will manage operations.
Sierra Pacific Resources said the company’s utilities, Nevada Power Co. and Sierra Pacific Power Co., will do business under the name NV Energy. The company also said it will seek shareholders’ approval to change its corporate name from Sierra Pacific Resources to NV Energy Inc.
Projects & Contracts
RuggedCom Inc. a provider of communications networking solutions received a purchase order totalling over $1 million for a wind farm application in China. This order represents the largest single purchase order ever received by RuggedCom. Expected shipments are to be spread out over the next 12 months.
Oglethorpe Power Cooperative plans to build up to three 100 MW biomass plants in Georgia. The cost per plant could reach $500 million, or $5,000 a kW. The first two plants are scheduled to enter service in 2014 and 2015. A third unit could go into service in 2015. The plants will use conventional fluidized bed boiler/steam turbine technology.
LAI International Inc. has been awarded contracts to provide more than 500 large bearing cages to Timken Romania S.A. for wind turbines sold in Europe and an additional 300 for wind power projects in the United States. These critical bearing cages are 40 to 50 inches in diameter and provide roller support for frictionless rotation of the main turbine shaft. Additional contracts anticipated for the programs are forecasted to be valued at several million dollars over the next several years.
Flowserve Corp. is expanding in the Latin America power generation industry by supplying pumps to Maire Tecnimont Group (Italy), one of the major European engineering contractors with a leading position in the regional power generation market. Orders involve two power stations located in Chile: Bocamina II for Endesa, and Puerto Coronel for Colbun. Both plants feature single reheat, coal-fired boilers and will generate electricity for local domestic and industrial use. Each plant has an output in excess of 350 MW.
People & Personnel
GE Digital Energy said that Juan Macias has been named general manager for the company’s Protection & Control product line. Macias will be responsible for the growth strategy, global operations and new technology development for Digital Energy’s Protection & Control products. Macias joined GE Consumer & Industrial’s Electrical Distribution business in 2005 where he first served as product general manager for Industrial Breakers and Controls. He then served as product general manager for Electrical Construction Products.
The Shaw Group Inc. named four people to roles in the Nuclear Division of its Power Group. Harold Thornberry, William A. Fox III, Alan Beckman and Mehdi Maibodi will be based at Shaw’s Power Group headquarters in Charlotte, N.C. As vice president of nuclear construction, Thornberry will be responsible for Shaw’s nuclear construction operations. Prior to joining Shaw, he worked for Bechtel Corp. for more than 35 years. Fox and Beckman join the Nuclear Division as project directors overseeing the construction of twin AP1000 units at the existing Vogtle Electric Generating Plant site near Augusta, Ga., and the V.C. Summer Nuclear Station near Jenkinsville, S.C., respectively. Mr. Maibodi joins the Nuclear Division as director of business management from Progress Energy, where he served as project manager for the past two years. Mr. Maibodi previously served as a project manager and was office manager for Bechtel Corp.’s office in northern Virginia.
Christopher M. Crane, executive vice president of Exelon Corp. and COO of Exelon Generation, has been named president and COO of Exelon Corp. Crane will retain his title and role as COO of Exelon Generation as well. Crane is a 30-year veteran of the U.S. nuclear and power generation industries. He has played an instrumental role in the ongoing operational improvements within the Exelon fleet of 17 nuclear energy plants, the largest in the United States and third largest in the world, since joining predecessor company Commonwealth Edison in 1998 as a nuclear executive. He became Exelon’s chief nuclear officer in 2004. For the past year, he has also been the senior operational executive for Exelon Generation, which includes 18,000 MW of nuclear generation and 8,000 MW of natural gas, coal, hydroelectric and alternative energy in five states.
Pacific Gas and Electric Co’s board elected Desmond A. Bell as senior vice president, shared services and chief procurement officer; and Fong Wan as senior vice president, energy procurement. In addition, John T. Conway senior vice president and chief nuclear officer, also will assume responsibilities for non-nuclear generation. Bell will continue his oversight of supply chain, materials operations, supplier diversity, transportation services, corporate real estate, environmental, technical and land services. Wan will continue to be responsible for gas and electric supply planning and policies, market assessment and quantitative analysis, supply development, procurement and settlement. Torres’ responsibilities as vice president, customer operations, will encompass Pacific Gas and Electric Co.’s revenue and credit collections, billing, and payment process functions. Conway will assume responsibility for all of PG&E’s power generation assets, including nuclear, fossil and hydroelectric as well as the strategic direction and financial success in the following power generation sectors: nuclear, fossil, hydroelectric, cogeneration and renewables.
Wilson TurboPower named Phillip Vessa as vice president of Turbine Technology, responsible for driving the engineering, fabrication and marketing of Wilson’s turbine engine for the distributed-power-generation industry. Vessa led development of the first two commercial engines for Capstone Turbine Corp. in the 1990s and subsequently held management positions in product development, sales, marketing and business development. He also developed commercial turbines at Sundstrand Power Systems, Williams International, Sundstrand Turbomach and Solar Turbines International.
Mergers & Acquisitions
MidAmerican Energy Holdings Co. and Constellation Energy reached a definitive merger agreement in which MidAmerican will buy all of the outstanding shares of Constellation Energy for cash consideration of approximately $4.7 billion, or $26.50 a share. As agreed under the terms of the tentative agreement announced on Sept. 18, Constellation Energy issued to MidAmerican $1 billion of preferred equity yielding 8 percent upon signing the definitive agreement. The definitive agreement was approved by both companies’ Boards of Directors and is subject to shareholder and customary federal and state regulatory approvals. The transaction is expected to close within nine months. The agreement expires nine months after its execution but may be extended by either company for up to three months.