U.K.'s Leading Carbon Storage Project Seeks Buyer

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Powerfuel plc (Doncaster, England), the owner of one of the U.K.'s leading carbon capture and storage (CCS) projects, has gone into administration and is now seeking a buyer for the pilot plant.

The project is located at the proposed 900-megawatt (MW) coal-fired, integrated gas combined-cycle plant in Hatfield, South Yorkshire. Administrators KPMG have been appointed to sell Powerfuel's mining assets and the carbon capture project. The company's two subsidiaries, Powerfuel Mining Limited, which owns Hatfield Colliery and Powerfuel Power Limited, the power generation company, are not in administration.

This is another serious blow to the U.K. government's goal of becoming the world's leading location for CCS development. In October this year, E.ON AG (OTC:EONGY) (Dusseldorf, Germany) canned its CCS development plans for the 1,600-MW Kingsnorth coal-fired plant in the U.K., blaming poor economic conditions. For related news, see October 25, 2010, article - E.ON Drops U.K. Carbon Capture Project.

Powerfuel, despite winning a significant grant for the CCS project from the European Commission this year, was unable to come up with the additional 759 million euros ($1 billion) needed to build the plant.

"Developing low-carbon energy generation requires a large amount of capital up front, and the CCS development falls £635 million ($1 billion) short of the investment needed to progress the project beyond the preliminary stage," explained Richard Fleming, joint administrator and U.K. Head of Restructuring at KPMG. "The substantial funding gap has not been addressed in the past 12 months, and accordingly the project has stalled. The administration will enable a sales process to find a new owner, who can both take the CCS project forward and buttress the mine, which also requires around £30 million ($47.4 million) of capital expenditure for works improvements."

Fleming added: "CCS is projected by the Department on Energy and Climate Change to be one of the cheapest forms of low-carbon energy generation. Powerfuel plc boasts the only license to trial the technology in the U.K. While the economic environment is still challenging, we are hopeful that we can secure a sale of both companies and will be actively speaking to interested parties from today."

In October 2009, the Hatfield CCS project was the only U.K. carbon capture project to secure funding from the European Commission, with an award of 180 million euros ($237 million). The project beat out competition from plants including Longannet, in Fife, Scotland; Tilbury in Essex; and Kingsnorth in Kent, which are respectively owned and operated by ScottishPower (Glasgow, Scotland); Tilbury Green Power Limited, which is a subsidiary of Express Energy Holdings (Birmingham, England); and E.ON. For additional information, see related news item from October 9, 2009 - Hatfield CCS Project Tipped for European Funding.

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