Dynegy purchase of Ameren coal plants hinges on environmental ruling

2013-09-15T00:01:00Z Dynegy purchase of Ameren coal plants hinges on environmental rulingBy JEFFREY TOMICH - Lee News Service Writer Herald-Review.com

ST. LOUIS — Ameren Corp. and Dynegy Inc. face off with environmental groups this week in a hearing that could decide the future of some of Illinois’ largest coal-fired power plants.

The companies are seeking a waiver from the Illinois Pollution Control Board that would provide five more years to meet stricter air pollution limits for Ameren’s coal plant fleet in Central and Southern Illinois.

Ameren received such a variance a year ago after a contentious hearing before the same board. Six months later, Dynegy agreed to acquire the plants and wants the same treatment.

Filings with the Pollution Control Board suggest both sides will make the same arguments they did a year ago.

The power companies said the subsidiary formed to acquire the plants can’t afford the costly pollution controls in a depressed power market. And without relief, some of the plants may be forced to close, meaning a loss of local jobs and taxes.

Opponents argue that emissions from the coal plants shouldn’t be allowed to further degrade air quality and contribute to respiratory illness and heart disease.

The Sierra Club and Chicago-based Environmental Law & Policy Center also say the current waiver request differs from Ameren’s in a meaningful way because the hardship being claimed by Dynegy is self-imposed.

Ameren last year argued that it was broadsided by a sequence of unavoidable market forces — the recession, a drop in natural gas prices and environmental regulations. But Dynegy, which operates a fleet of coal-fired power plants in Illinois, is voluntarily taking on the Ameren plants and the risk that goes with them.

Dynegy has proposed to acquire the plants through a separate company, Illinois Power Holdings. The new firm is a limited liability company that will have few if any legal or financial connections to the parent company, which last summer emerged from a bankruptcy.

The structure provides benefits to Dynegy shareholders if power prices rebound, critics say, but the Illinois communities and plant employees and retirees stand to be losers if the subsidiary is forced into bankruptcy.

“There’s a significant risk that workers’ pensions will be unfunded and that local communities will have to shoulder the burden of environmental cleanup costs,” said David Johnson, a founding partner of ACM Partners, a Chicago financial firm hired by the Sierra Club to analyze the transaction.

Katy Sullivan, a Dynegy spokeswoman, disagreed. The acquisition proposal “provides the best and most certain future for these facilities, the employees and the local communities,” she said.

If the variance is granted, it will “provide certainty to the employees and communities in Central and Southern Illinois that count on the economic benefit of the continued operation of the (Ameren) energy centers,” Sullivan said.

Ameren, too, has a lot at stake. For the St. Louis-based company, the transaction provides an exit from the volatile wholesale power generation business and a way to erase an $825 million debt that had dragged down credit ratings.

The fate of the plants and their employees is unclear if Dynegy’s request is denied. According to regulatory filings, the waiver is a condition of closing the deal.

Robert Flexon, Dynegy’s chief executive, was asked last month during a conference call with analysts what the company would do if the waiver is denied.

“We would have to take it back to the board, review the options, review the financial impact of shutting a couple of plants down,” he said on Aug. 1.

Ameren spokesman Joseph Muehlenkamp said the company isn’t ready to discuss its plans if the variance is denied.

“We fully expect to receive the required approvals and complete this transaction,” he said. “Beyond this, we won’t speculate.”

jtomich@post-dispatch.com|(314) 340-8320

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