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Coal Finance 2013
Brayton Point: A Cautionary Tale
David SchlisselMarch 18, 2013
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Brayton Point
2
• Units 1-3 - coal-fired with some capability to burn natural gas• Total 1,134 MW
• Units between 45 and 50 years old in 2013
• Unit 4 – oil-fired• 445 MW
• 38 years old in 2013
©2012 The Institute for Energy Economics & Financial Analysis
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Life Was Pretty Good Until 2009
3
• High annual capacity factors.• Selling output for substantially more than
the cost of generation.• Making a lot of money.• No problem deciding to invest a billion
dollars on new scrubber system and cooling towers in order to get environmentalists off back.
• But now in 2013 Dominion has written off ~ $700 million of this investment and is selling the plant as part of a package with valuable assets.
©2012 The Institute for Energy Economics & Financial Analysis
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Then NE Natural Gas Prices Collapsed
©2012 The Institute for Energy Economics & Financial Analysis 4
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
$ pe
r Mmbtu
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And Average NE Wholesale Electric Prices Went South With Them
5©2012 The Institute for Energy Economics & Financial Analysis
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
$ pe
r MWh
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Annual Brayton Coal Unit Capacity Factors Crashed Too
©2012 The Institute for Energy Economics & Financial Analysis 6
84.7
79.5
72.7
66.2
34.2
16.3
0
10
20
30
40
50
60
70
80
90
2007 2008 2009 2010 2011 First 11 Monthsof 2012
Percen
t
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As Did the Pre-Tax Earnings from the Brayton Point Coal Units
©2012 The Institute for Energy Economics & Financial Analysis 7
$345
$229
$73
$24
$0
$50
$100
$150
$200
$250
$300
$350
$400
2009 2010 2011 2012
Millions of D
ollars
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Dominion’s Analysis of the Dark Spread
©2012 The Institute for Energy Economics & Financial Analysis 8
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NE Energy Futures Prices
. 9
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
2013 2014 2015 2016 2017 2018 2019 2020
Dollars per M
Wh
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Projected Brayton Coal Unit EBITDA 2013-2020 – Optimistic Scenario
©2012 The Institute for Energy Economics & Financial Analysis 10
$28.4
$13.7
$0.5
$2.4
$6.3
$15.0
$24.2
$35.3
$0
$5
$10
$15
$20
$25
$30
$35
$40
2013 2014 2015 2016 2017 2018 2019 2020
Millions of D
ollars
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Projected Brayton Coal Unit EBITDA – 2013-2020 – Less Optimistic Scenario
©2012 The Institute for Energy Economics & Financial Analysis 11
$28.4
$13.7
$0.5$1.4
$3.7
$7.7
$13.7
$21.1
$0
$5
$10
$15
$20
$25
$30
$35
$40
2013 2014 2015 2016 2017 2018 2019 2020
Millions of D
ollars
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Long Term Risks
• Wither natural gas and coal prices after 2020?• Revised ISO-NE Capacity Market after 2017 will likely
not favor coal.• Revised regional RGGI CO2 prices will be higher by $2-
3 dollars per ton.• Perhaps by early 2020s federal government will take
meaningful action on regulating (pricing) greenhouse gas emissions from existing coal plants like Brayton Point.
©2012 The Institute for Energy Economics & Financial Analysis 12
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Brayton Point Unit 4
. 13
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006 2007 2008 2009 2010 2011 First 11Months of
2012