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Fitch Insists Faltering Prairie State Energy Campus Has Legs

March 10, 2015

Fitch Ratings takes on critics of the Prairie State Energy Campus in a March 9 report that insists the plant has “favorable long-term fundamentals” that will ultimately serve the many struggling and deeply indebted communities that own a stake in it.

The report by the ratings agency is chronicled in a piece by SNL’s Matthew Bandyk describing how Fitch concedes but dismisses “some concern about how much longer the municipal utilities throughout the Midwest that buy power from Prairie State will be willing to keep raising their rates to help pay for the operating costs of the plant. “

Bandyk writes also that some cities tied to the plant are robbing Peter to pay Paul in order to maintain their commitment to the coal-fired plant, and notes among them that Paducah, Ky., is down to about two weeks of cash on hand.

Prairie State, built by Peabody Energy, incurred massive construction-cost overruns and by all accounts has not delivered as promised.

Separately, WPSD Local 6 in Paducah is reporting that the Paducah Power System, the single biggest customer of the Prairie State plant, announced yesterday that it was firing Fitch as its rating agency. Paducah Power official David Carroll said the utility’s management thinks it will get a more “favorable” rating by switching to Standard and Poor’s while saving $2,500 in fees.

Excerpts from the SNL story:

  • The Fitch report’s conclusions were challenged by representatives of the Institute for Energy Economics and Financial Analysis … Fitch ‘glibly’ said that the Prairie State owners are protected by the ‘take-or-pay’ power contracts, but that glosses over ‘the serious economic hardship being wreaked upon these communities,’ according to IEEFA Executive Director Sandy Buchanan. ‘You have businesses closing in Paducah because of the electric rates.’”
  • “Buchanan called Prairie State “the biggest anti-economic development project in the history of the Midwest.”
  • “A study by IEEFA Director of Resource Planning Analysis David Schlissel found that from January 2013 to August 2014, Paducah Power paid $40 million more than if it had purchased power directly on the wholesale market. Prairie State’s power costs more than double current wholesale prices in its region, according to the Fitch report.”

Full article (subscription required).

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