May 25, 2018 Read More →

Avenue Capital Not Sold on Coal’s Future at Navajo Plant

Bloomberg:

The company interested in buying one of the nation’s biggest coal-fired power plants said it is serious about its purchase bid, but also said fossil fuels aren’t a financial winner over the long haul. Until then, New York-based Avenue Capital Corp. thinks it can squeeze some value out of the 2,250-megawatt Navajo Generating Station in Arizona, currently slated for closure at the end of 2019.

“Extending the life of NGS beyond 2019 can provide a strategic glidepath to alternative energy resources, to a time when intermittent renewable resources can be economically stabilized by energy storage, while providing reliable power generation and economic value in the interim,” Craig Hart, a portfolio manager at Avenue Capital, told Bloomberg Environment.

A source familiar with Avenue Capital told Bloomberg Environment that “the firm believes the plant is in fundamentally sound condition.” The source—who spoke on condition of anonymity in order to speak candidly—also said Avenue “is considering a different operating profile that would better match the needs of the current market,” raising the possibility that the company wouldn’t run the power plant as an all-the-time baseload generator.

Some observers doubt that the plant will ever turn a profit, especially since one of the generating station’s biggest customers—a canal system that provides water to most of Arizona, known as the Central Arizona Project—has said it doesn’t want to keep buying power from the plant after 2019.

Without those kinds of commitments nailed down, any new owner of the plant won’t have revenue certainty, said David Schlissel, a director at the Institute for Energy Economics and Financial Analysis, a sustainable-energy research group in Cleveland. “So far there is no evidence of any such revenue certainty after 2019, or that anyone wants to continue to buy the power from the plant,” Schlissel told Bloomberg Environment.

More: Potential Buyer of Navajo Plant Seeks ‘Glidepath’ to Alternatives

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