Calpine Foresees Benefits of EPA Regulations for Natural Gas-Fired Power Plants

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Researched by Industrial Info Resources (Sugar Land, Texas)--Last Friday, Calpine Corporation (NYSE:CPN) (Houston, Texas) reported third-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) of $663 million, a 13% rise on EBITDA in 3Q09. Calpine's generation fleet consists primarily of natural gas-fired plants, along with some geothermal energy facilities. Calpine CEO Jack Fusco spoke optimistically about the impact that future regulations and legislation could have on the company.

"We think the future bodes very well for natural gas, given the impacts that have already materialized," said Fusco. "The EPA has proposed several forms of regulations that could have dramatic effects upon the landscape of power generation, the most stringent of which are the HAP [Hazard Air Pollutant] standards that are expected to be issued next year. Nearly half the United States' existing coal fleet--that's approximately 130 gigawatts (GW)--lacks scrubbers. Even more lack mercury controls and would not currently meet the rural standards. Now, add in the fact that our nation's fleet is old and getting older. Over 40% of the United States' nonrenewable plants are 35 years old or older, and past their economic lives. What you have are conditions that are ripe for asset-retirements, particularly among old coal units that simply cannot afford the investments required for compliance.

"Third-party analysts suggest that as much as 35 to 65 GW of coal capacity could be retired in response to HAP, which would have a meaningful impact on market recovery from a supply perspective, absent any uptick in demand. The good news for us is that natural gas-fired generation is capable of filling in that void of baseload generation that would be left by the coal retirements and intermittent renewables."

Industrial Info is tracking more than $2.2 billion in Calpine projects in the U.S. One of the largest projects under way is the Russell City Energy Center, a 619-MW combined-cycle plant near Hayward, California, that Calpine is building with Bechtel Power Corporation. Site preparation has begun, and the project is awaiting final approval from the Environmental Protection Agency (EPA) appeals board to begin construction. Calpine Executive Vice President and Chief Commercial Officer Thadd Hill said, "At Russell City, we have all permits, all contracts are done, and almost literally bulldozers and equipment are idling at the edge of the site, pending review of a decision from the environmental appeals board of the EPA. We expect that we will give full notice to proceed to our contractor imminently."

Information on this and other North American Power Industry projects is available in Industrial Info's North American Industrial Project Database.

View Project Report - 006003476

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