Dynegy (NYSE:DYN), a large operator of natural gas and coal power plants canceled its joint development agreement with LS Power to build a fleet of new coal power plants. LS Power does maintain the right to build these plants on their own, but this is unlikely without involvement from Dynegy.
Dynegy also says it is “re-evaluating greenfield development options, as well as two projects under construction – Plum Point in Arkansas and Sandy Creek in Texas.” These projects are expected to be operational in 2010 and 2012.
“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.”
Dynegy stock values responded positively to the news, with a 19% gain on January 2, the day the announcement was made. Stock has gained another 10% in the last week.
The Sierra Club initiated a campaign to Clean Up Dynegy last February, which resulted in thousands of phone calls to the company. Investors attending Dynegy’s shareholder meeting last May were met by a sea of protesters from numerous organizations, including the Sierra Club, RAN, and Green America (formerly Co-op America). Inside the meeting, concerns were raised about the cost of carbon regulations to the company.
“Wall Street’s leading banks already understand that backing coal is becoming an increasingly expensive and risky proposition,” said Rebecca Tarbotton, director of Rainforest Action Network’s Global Finance Campaign. “Companies around the world are realizing that going green can be a boon both to the environment as well as their own bottom line. Dynegy needs to open its eyes and help move America toward a clean energy future.”
The business environment for the coal industry has changed tremendously from two years ago, when these plants were first planned. Additionally, several environmental organizations were very effective at pointing this out and making a compelling business case against continuing with construction of these plants. What originally looked like a huge year for Dynegy for expansion has proven otherwise.
“Dynegy — the company that was being called ‘the next King Coal’ for its extensive new power plant plans — has all but given up pursuit of that throne,” said Yochi Zakai of Green America. “2009 promises to be a landmark growth year for clean energy and with this development coal-fired power is one step closer to being mothballed once and for all in the U.S.”