The Chicago-based power-generation subsidiary of California-based Edison International already has shuttered two of the five units at the 2,698-megawatt Collins plant. The remaining three are running under a contract with Commonwealth Edison Co. parent Exelon Corp., which expires at the end of this year.
The culprit, the company says, is high natural gas prices that are making it hard for gas-fired plants to compete with plants powered by cheaper coal or nuclear power in a market where power supply is outstripping demand.“We just don’t see that plant being economically competitive in the current market because it runs on natural gas,” a MidwestGen spokesman said.
MidwestGen currently leases the plant from a subsidiary of New Jersey-based Public Service Enterprise Group (PSEG). That lease runs another 29 years, and minimum annual payments on it are scheduled to increase to $90 million in 2006 from $50 million this year and next.
MidwestGen has an agreement in principle with PSEG to buy out the lease for $774 million and become the plant’s sole owner. But that agreement depends on MidwestGen securing financing. The company refinanced $781 million of bank debt last December, but its debt rating remains below investment-grade. If it can’t obtain financing, the company will seek to restructure the lease.
While the Collins plant continues to be troubled, MidwestGen’s six coal-fired plants continue to operate and are competitive, the company spokesman said.
Reprinted from Crain's Chicago Business
Copyright 2004 Crain Communications Inc.