Wallula Power Project on Hold Possibly Until Spring 2003

---

Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). The Wallula Power Project, a natural gas-fired combined-cycle plant, proposed by Newport Northwest LLC, an affiliate of Newport Generation (Newport Beach, California), a private energy producer (PEP) specializing in the development of power generation assets in the U.S and abroad, is currently on hold until market conditions improve. Newport Northwest is expecting to hear from Gary Locke, Washington's governor, by the middle of November, to see whether or not the site permit will be approved.

The Wallula Power Project will be located in Walla Walla County, Washington. It is planned for a 183 acre parcel, and it is within six miles of a regional natural gas transmission line and within five miles of Bonneville Power Administration (BPA) bulk transmission lines. Newport Northwest has requested a connection and upgrade to the BPA transmission system that would allow power delivery to customers in the Pacific Northwest.

In April 2001, General Electric (NYSE: GE) received $375 million in contracts for supply and contractual services for the plant. GE will guarantee availability while providing services, parts, and repairs for all planned maintenance. The Wallula Power Project, with total capacity of 1,300 megawatt (MW), will consist of four 172-megawatt combustion turbines with heat recovery steam generators (HRSGs), a 310 megawatt steam turbine and also one for 306 megawatts. The project's estimated cost is $550 million. Newport Northwest LLC would construct and operate the generation plant, including the water supply line. BPA would design, construct, and operate the two 500-KV transmission line segments and switchyard.

Whether the plant will be built or not depends on if the developer can find a buyer for the plant's power and financing for construction. It was revealed last November that Mirant (NYSE: MIR) (Atlanta, Georgia) had agreed to a 20-year contract to buy the power from Newport Northwest}s Wallula Project. But Mirant is facing more than a dozen lawsuits, alleging it misrepresented its business operations from January 2001 to May 2002. In June 2002, Newport Northwest LLC sent a letter to Mirant requesting a $166 million letter of credit under the company's agreement. Mirant disagreed with Newport's explanation of the terms of the agreement. The arrangement was cancelled in August 2002.

The termination with Mirant has complicated the process. Without a buyer for the plant's power, financing the project will be harder. Newport Northwest LLC had already chosen Bechtel, one of the world}s largest engineering-construction firms, with related services to develop, engineer, manage, build, and operate, as their primary contractor. But with market prices low and buyers walking away, it is unclear when the plant will be built.