Dynegy / LS Power

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Dynegy
Type Public (NYSE: DYN)
Headquarters 1000 Louisiana St., Ste. 5800
Houston, TX 77002
Area served AR, AZ, CA, CT, GA, IL, KY, ME, MI, NV, NY, OH, PA, TX
Key people Bruce A. Williamson, CEO
Industry Electric Producer & Distributor
Products Electricity
Revenue $3.10 billion (2007)[1]
Net income ▲ $264.0 million (2007)[1]
Employees 1,800 (2007)
Subsidiaries LS Power
Illinova
Destec Energy
Dynegy Canada
Dynegy Europe
Dynegy Global Communications
Dynegy Operating Co.
Dynegy Midwest Generation
Dynegy Midstream Services
Dynegy Northeast Generation
Dynegy Storage
Dynegy Technology Strategy & Ventures
Wholesale Energy Network
Website Dynegy.com

Dynegy Inc. (NYSE: DYN), based in Houston, TX, is a large owner and operator of coal, fuel oil, and natural gas power plants.[2] The company's portfolio consists of 31 power generation facilities producing approximately 20,000 megawatts of power in the Western, Midwestern, and Northeastern United States.[3]

On April 9, 2018, Texas-based Vistra Energy, the parent company for TXU Energy and Luminant, announced it had completed its merger with Dynegy. Vistra Energy will be the name of the combined company moving forward.[4]

Background

Once known as "The Natural Gas Clearinghouse," Dynegy adopted the "New Economy" branding in 1998, after which the company structured itself in a manner similar to Enron, launching several business ventures, including an online trading platform and broadband communications services, which could be misconstrued of those of its larger rival.

In March 2007, Dynegy acquired LS Power, a privately-held coal and gas power developer, to form the largest builder of coal plants in the country.[5][6] LS Power received 340 million shares of Dynegy common stock, $100 million in cash, and a $275 million note. Dynegy assumed approximately $1.8 billion in debt from LS Power.[5]

History

The Natural Gas Clearinghouse, the predecessor to Dynegy, became better known by its later shortened name, NGC Corporation in the early 1990s, when it became a publicly traded company listed on the New York Stock Exchange. NGC was an integrated natural gas services company, paying a cash dividend to shareholders each year since 1994. By 1996 it had grown to US$550 million in assets, and carried US$525 million in long-term debt.[7]

In June 1998, Dynegy Inc. was created from the merger of NGC Corp. with Chevron Corporation's natural gas and natural gas liquids businesses.[8]

In a merger completed February 1, 2000, Illinova Corporation became a wholly-owned subsidiary of Dynegy Inc., a deal in which Chevron Corporation also took a 28% stake. Illinova, the utility holding company of Illinois Power Company, had grown to over US$415 million in assets and US$1.8 billion long-term debt.[7] As of the late 1980s, the IP utility company had operated almost entirely from coal plants, with less than 1% fueled from oil and gas.[9]

Dynegy, along with Enron, El Paso Corporation, Reliant Energy and several other energy companies, was accused of price fixing and other fraudulent practices during the California electricity crisis in 2000. In 2001, the company made an unsuccessful takeover bid for Enron, pulling out at the last minute following an unexpected restatement of earnings by Enron. Shortly after the pull-out, Enron filed for Chapter 11 bankruptcy and sued Dynegy. One aspect of the takeover deal that did survive, however, was Dynegy's acquisition of the Northern Natural Gas Company pipeline, Enron's most lucrative pipeline asset.

Unfortunately for Dynegy's shareholders and employees, these events did nothing to prevent Dynegy itself from lapsing into a crisis similar to that of Enron in late 2002. Amid accusations of accounting fraud and other misdoings, founder Charles Watson resigned, and the company was forced to sell the Northern Natural Gas pipeline to a consortium of investors led by noted billionaire Warren Buffett.

Following these incidents, the company hired Bruce Williamson, a former Duke Energy executive, who began a program of cost cutting, elimination of unprofitable businesses, and financial restructuring which was successful in averting a bankruptcy filing. The company disposed of all its businesses with the exception of its core merchant power and natural gas liquids businesses. Refocused on these core businesses, and managed with a strong emphasis on efficiency and cost control, Dynegy was able to stabilize its financial position.

In 2004, Dynegy sold the Illinois Power Company to Ameren Corporation, the successor company of the IP Company's original partners from the 1952 Midwest Power Pool system.[10]

In late 2005, Dynegy continued its restructuring by selling its natural gas liquids business[11] to Targa Resources, a company owned by private equity firm Warburg Pincus. Bold text

Power portfolio

Out of its total 23,402 MW of electric generating capacity in 2005 (2.19% of the U.S. total), Dynegy produces 75.9% from natural gas, 16.0% from coal, and 8.0% from oil. Dynegy owns power plants in Arizona, California, Connecticut, Georgia, Illinois, Kentucky, Louisiana, Maine, Michigan, Minnesota, Mississippi, Nevada, New York, Ohio, Pennsylvania, Texas, and Wisconsin.[12]

EPA releases list of 44 "high hazard" coal ash dumps

In response to demands from environmentalists as well as Senator Barbara Boxer (D-California), chair of the Senate Committee on the Environment and Public Works, the EPA made public a list of 44 "high hazard potential" coal waste dumps. The rating applies to sites at which a dam failure would most likely cause loss of human life, but does not include an assessment of the likelihood of such an event. Dynegy owns 2 of the sites, both of which are located in Illinois. One stores coal combustion waste for the Havana Power Station, the other for Wood River Station.[13][14] To see the full list of sites, see Coal waste.

Disclosing the financial impacts of global warming

Dynegy was one of five energy companies subpoenaed in 2007 by New York Attorney General Andrew Cuomo in an effort to publicize the financial risks of investing in fossil fuels. In October 2008, Dynegy agreed to disclose information about how global warming may impact its business practices. The agreement calls for Dynegy to divulge in its annual reports the potential consequences if federal rules are adopted to limit carbon dioxide emissions. Dynegy also agreed to report its efforts to mitigate CO2 emissions, estimates of its financial liability in settling possible lawsuits related to climate change, and the potential impact of climate shifts on its ability to generate electricity. Xcel Energy agreed to similar terms in August.[15]

Weakening economy and lessening demand

During Dynegy's third quarter earnings call in November 2008, CEO Bruce Williamson announced that, "very little new power plant development is going on in the country and very little can be economically justified in the current environment." He suggested that economic conditions would likely slow the demand for power in the short term. These statements may have been influenced by the Cuomo settlement, requiring the company to divulge the financial risks of coal investment. However, Williamson also stated that in the longer term, he believes that weather conditions, rather than economic conditions, will be the prime driver of electricity demand, such that global demand will "continue to put upward pressure on power prices."[16]

Dynegy to reconsider building new coal plants

In December 2008, Dynegy CEO Bruce Williamson announced that the company was reevaluating its role in developing new power plants. Williamson cited the tightening credit markets and difficulty in permitted new coal plants as reasons for reconsidering its invovlement in siting, permitting, financing and constructing at least six new projects. As an alternative, the company will look at adding generation to its existing sites in the Northeast, Midwest and Western U.S.[17]

The projects to be reassessed include:[17]

Dynegy dissolves joint venture with LS Power

On January 2, 2009, Dynegy announced it was dissolving its development venture with LS Power, in part because of the credit crisis. Under the agreement, LS Power will maintain the rights to build the coal plant projects under consideration in Arkansas, Georgia, Iowa, Michigan and Nevada. Dynegy will also pay LS Power about $19 million.[18] Without Dynegy's support, LS Power will likely face a more difficult time raising funds and securing long-term purchase agreements to enable the new plants to move forward.[19]

The stock market responded positively to the announcement, sending Dynegy's stock up 19% on January 2. and another 10 percent in the following week.[20]

In detailing the reasons behind the dissolution, Dynegy CEO Bruce Williamson said:[21]

“The development landscape has changed significantly since we agreed to enter into the development joint venture with LS Power in the fall of 2006,” said Bruce A. Williamson, Chairman, President and Chief Executive Officer of Dynegy Inc. “Today, the development of new generation is increasingly marked by barriers to entry including external credit and regulatory factors that make development much more uncertain. In light of these market circumstances, Dynegy has elected to focus development activities and investments around our own portfolio where we control the option to develop and can manage the costs being incurred more closely.”

On January 6, 2009, LS Power announced it was cancelling plans to build the proposed Elk Run Energy Station in Waterloo, Iowa.[22]

LS Power puts Nevada plant on indefinite hold

On March 5, 2009, LS Power notified Nevada state regulators that it was withdrawing its application to build the White Pine Energy Station. The company cited economic conditions and regulatory uncertainties. Instead, LS Power will focus on completing a planned 500-mile transmission line project to provide new access to renewable energy resources across Nevada.[23]

Dynegy CEO Bruce Williamson wins worst "Scrooge" of 2008 award

In December 2008, Co-Op America announced its list of the worst corporate "Scrooges" of 2008, awarded to "the CEOs who exhibited the worst kinds of unbridled greed and a lack of compassion or concern for others over the last year." Bruce Williamson was on the list for "Fossil Foolishness," because in spite of his recent statement very little new power plant development can be justified economically, Dynegy is forging ahead with plans to build six new coal-fired power plants. Williamson was also a runner-up for 2008's Fossil Fool of the Year Award for plans to construct more new power plants than any other energy company.[24]

Coal lobbying

Dynergy is a member of the American Coal Ash Association (ACAA), an umbrella lobbying group for all coal ash interests that includes major coal burners Duke Energy, Southern Company and American Electric Power as well as dozens of other companies. The group argues that the so-called "beneficial-use industry" would be eliminated if a "hazardous" designation was given for coal ash waste.[25]

ACAA set up a front group called Citizens for Recycling First, which argues that using toxic coal ash as fill in other products is safe, despite evidence to the contrary.[25]

Sierra Club campaign

In February 2008, The Sierra Club launched a nationwide campaign to pressure Dynegy to abandon its plans to build six new coal-fired power plants nationwide and instead to shift its focus to cleaner energy solutions.[26] The campaign is the first attempt by anti-coal forces to single out a single company on a nationwide basis.[27]

The campaign began with mass call-ins to Dynegy headquarters originating from twenty states -- "thousands of calls," according to the Sierra Club. Dynegy's CEO, Bruce Williamson, complained that his company was being unfairly picked on. Williamson was also picked as one of five executives to receive 2008 "Fossil Fool of the Year" awards.[28]

December 2011: Longleaf and Plum Point II cancelled

On December 12, 2011, the Sierra Club announced a legal agreement between LS Power and Sierra to cancel Longleaf, a 1200 MW proposed coal plant in Georgia, and Plum Point II, a 665 MW proposed coal plant in Arkansas. In addition, as part of the agreement, Sierra dropped its opposition to the Sandy Creek Plant in Texas and LS Power agreed to stricter air pollution controls at Sandy Creek. Sierra Club noted that Longleaf, which had first been proposed in 2001, was among the first coal plants among the hundreds of coal plants proposed -- and mostly defeated -- in the recent coal boom.[29]

Existing coal-fired power plants

Dynegy had 12 coal-fired generating stations in 2005, with 3,755 MW of capacity. Here is a list of Dynegy's coal power plants:[12][30][31]

Plant Name State County Year(s) Built Capacity 2007 CO2 Emissions 2006 SO2 Emissions
Baldwin IL Randolph 1970, 1973, 1975 1892 MW 13,600,000 tons 24,977 tons
Wood River IL Madison 1954, 1964 500 MW 2,579,000 tons 7,628 tons
Havana IL Mason 1978 488 MW 2,382,000 tons 5,810 tons
Danskammer NY Orange 1959, 1967 387 MW 2,099,000 tons 10,639 tons
Hennepin IL Putnam 1953, 1959 306 MW 2,169,000 tons 46,257 tons
Vermilion IL Vermilion 1955, 1956 182 MW 1,086,000 tons 579 tons

In 2006, Dynegy's 6 coal-fired power plants emitted 23.9 million tons of CO2 and 96,000 tons of SO2 (0.6% of all U.S. SO2 emissions).

Illinois Power Company and Dynegy Midwest Generation Settlement

On March 7, 2005 the U.S. Department of Justice and the U.S. EPA along with the State of Illinois announced a settlement between Illinois Power Company and its sucesscor, Dynegy, addressing alleged violations of New Source Review provisions of the Clean Air Act at company's Baldwin Energy Station. The EPA noted that sulfur dioxide (SO2) and nitrogen oxide (NOx) emissions at the plant will decrease by 54,000 tons each year through the installation of approximately $500 million worth of new pollution control equipment. In addition to the Baldwin Generating Station, the Havana Power Station, Hennepin Power Station and Vermilion Power Station, Wood River Station were involved in the settlement.

The EPA stated that this "settlement requires installation of four new flue gas desulfurization devices (scrubbers) to control SO2; four new baghouses to control particulate matter (soot); and operation of existing control equipment, including three selective catalytic reduction (SCR) systems, year-round to control NOx. The entire five-plant system will be subject to annual emission caps to assure that significant system-wide reductions for both SO2 and NOx are achieved."[32]

Coal Projects Sponsored by Dynegy / LS Power

On hold or cancelled

Active Sandy Creek Plant (Texas)

Proposed coal plant closures

Vermillion to close in first quarter 2011

On Dec. 28, 2010, Dynegy announced that it plans to mothball its Vermilion Power Station in Illinois in the first quarter of 2011. Factors influencing the company’s decision, according to a news release from Dynegy, include the relatively small size of the facility, older technologies and coal delivery challenges that lead to high production costs, as well as weak electricity demand, low prices for power and uncertainties over future regulation. Vermilion’s coal is transported from western states by rail to Danville and then trucked to the Vermilion site. This is the most significant factor leading to Vermilion’s higher production costs, according to the news release.[33]

LS Power invests in Alternative Power

Perhaps in an acknowledgement of the writing on the wall, LS Power recently announced the creation of a business unit dedicated to renewable Energy.

According to Mike Segal, Chairman and Chief Executive Officer of LS Power, "We have received significant feedback from our load-serving customers and they are interested in renewable electricity solutions. While most renewable resources still require state or federal incentives to be competitive with traditional forms of generation, as the technologies evolve, they are becoming increasingly cost effective. These customer and technological dynamics, when coupled with the political determination to increase renewable resource utilization, is an attractive backdrop for creating a scalable renewable business."

References

  1. ↑ 1.0 1.1 Dynegy Inc., BusinessWeek Company Insight Center, accessed July 2008.
  2. ↑ Regional Summary of Dynegy U.S. Generation Facilities, Dynegy corporate website, accessed March 2008. (Pdf)
  3. ↑ About Dynegy, Dynegy corporate website, accessed March 2008.
  4. ↑ "Vistra / Dynegy Merger," Vistra Energy website, accessed August 2018
  5. ↑ 5.0 5.1 "Dynegy Announces Completion of LS Power Transaction", Dynegy press release, April 2, 2007.
  6. ↑ LS Power Overview, LS Power corporate website, accessed March 2008.
  7. ↑ 7.0 7.1 Standard & Poor's Stock Guide, April 1996
  8. ↑ "Chevron Corp. Applauds Dynegy-Illinova Merger", Chevron Press Release Archives, Feb. 2, 2000.
  9. ↑ Standard & Poor's Stock Guide, December 1987.
  10. ↑ About Us Ameren corporate website, accessed March 2008.
  11. ↑ "Targa is a Youngster with a Precocious Streak", Houston Chronicle, May 17, 2007.
  12. ↑ 12.0 12.1 Existing Electric Generating Units in the United States, 2005, Energy Information Administration, accessed April 2008.
  13. ↑ Shaila Dewan, "E.P.A. Lists ‘High Hazard’ Coal Ash Dumps," New York Times, June 30, 2009.
  14. ↑ Fact Sheet: Coal Combustion Residues (CCR) - Surface Impoundments with High Hazard Potential Ratings, Environmental Protection Agency, June 2009.
  15. ↑ "Spelling out global warming costs," TimesUnion, October 24, 2008.
  16. ↑ Dynegy Inc. Q3 2008 Earnings Call Transcript, Seeking Alpha, November 6, 2008.
  17. ↑ 17.0 17.1 "Dynegy to rethink new coal-fired power projects," Reuters, December 11, 2008.
  18. ↑ Mike Barris, "Dynegy Ends Joint Venture for Projects," Wall Street Journal, January 3, 2009.
  19. ↑ "Dynegy Abandons Plans for New Coal Power," SustainableBusiness.com, January 6, 2009.
  20. ↑ "6 Planned Coal Power Plants Canceled- Stock Rose 19%," Triple Pundit, January 8, 2009.
  21. ↑ Eoin O'Carroll, "A coal giant rethinks coal," Christian Science Monitor, January 7, 2009.
  22. ↑ LS Power Elk Run Energy Station
  23. ↑ "Plans for 2 coal-fired power plants on hold in Nev," Associated Press, March 5, 2009.
  24. ↑ [http://www.earthtimes.org/articles/show/worst-ceos-of-the-dismal,652749.shtml "Worst CEOs of the Dismal Year of 2008: 'Corporate Scrooges' Named by Co-Op America," The Earth Times, December 11, 2008.
  25. ↑ 25.0 25.1 Coal-Fired Utilities to American Public: Kiss my Ash DeSmogBlog.com & PolluterWatch, October 27, 2010.
  26. ↑ "Sierra Club to Pressure Dynegy Over Coal-Fired Plants", Houston Business Journal, February 19, 2008.
  27. ↑ "Out of the Frying Pan: Dynegy targeted by Sierra Club in new anti-coal campaign," Ted Nace, Gristmill, April 8, 2008
  28. ↑ "Out of the Frying Pan: Dynegy targeted by Sierra Club in new anti-coal campaign," Ted Nace, Gristmill, April 8, 2008
  29. ↑ "Longleaf Cancellation Marks End to Nation's Longest Running Fight Against Coal Plant," Sierra Club press release, December 12, 2011
  30. ↑ Environmental Integrity Project, Dirty Kilowatts: America’s Most Polluting Power Plants, July 2007.
  31. ↑ Dig Deeper, Carbon Monitoring for Action database, accessed June 2008.
  32. ↑ "U.S. Announces Settlement of Illinois Power Case - Company will spend $500 million to reduce air pollution by over 54,000 tons per year," U.S. EPA, March 7, 2005
  33. ↑ Tracy Moss, "Dynegy will close power plant near Oakwood" The Illinois News Gazette, Dec. 28, 2010.

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