E.ON Pulls Killingholme Gas-Fired Plant From Service

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland) - The ongoing closure of U.K. gas-fired plants continued last week as E.ON (XETRA:EOAN) (Düsseldorf, Germany) announced that it was withdrawing its 900-megawatt (MW) Killingholme plant from the U.K. electricity grid.

The decision comes after the Combined Cycle Gas Turbine (CCGT) failed to win support in the recent Capacity Market Auction conducted by the country's grid operator, National Grid plc (NYSE:NGG) (London). The auction was designed to award contracts to plants that would generate power through 2018/19 in order to secure the U.K.'s security of supply. However, only one CCGT plant -- Trafford Power Station -- was awarded a contract, while Killingholme 1 and 2, Peterhead, Brigg, Kings Lynn and others failed to win a contract.

E.ON said it is applying for a Supplemental Balancing Reserve (SBR) contract which might see the plant returned to service.

Killingholme consists of two 450 MW units and employs around 50 staff. It is notable for becoming the first plant in the U.K. to be successfully returned to service after a period of mothballing in 2005.

E.ON UK Chief Executive, Tony Cocker, said: "First and foremost we are focused on supporting our colleagues who are potentially affected by this change and will work closely with them in the coming weeks and months to ensure the best possible options are available on an individual level. The reality, however, is that the market conditions for gas-fired power stations are extremely difficult and without support from the SBR contract, permanent closure is a real and present risk to Killingholme. Over the last few years we have invested billions in the U.K.'s energy infrastructure but there is no doubt that the challenging operational environment continues to provide uncertainty and risk that must be addressed."

E.ON is not alone in idling or closing gas-fired plants. Last month Centrica plc (OTC:CPYYY) (Windsor, England) announced that it plans to close its Brigg CCGT plant as well as its Killingholme CCGT plant -- located near E.ON's plant. The company had tried to sell the plants but claimed the offers were far below what they had expected.

Speaking about the future of its gas power generation assets in February, Iain Conn, Centrica Chief Executive, said: "In power, the Humber and Langage gas-fired stations are cash generative at the operating level in the current environment. We will retain these assets, however following a review we plan to close the Killingholme and Brigg power stations. We will also be taking action to make the management of our power portfolio more efficient".

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