Power plant concerns analysts

Power plant concerns analysts

Oct 31, 2007 - Knight Ridder Tribune Business News
Author(s): Thomas Content

Oct. 31--Wisconsin Energy Corp.'s construction of a $2.3 billion coal-fired power plant in Oak Creek is on schedule, but the fight over one environmental permit for the project stirred interest from investment analysts Tuesday.

At issue is the water intake structure in Lake Michigan that would provide water to cool the plant. Environmental groups Clean Wisconsin and Sierra Club -- as well as Illinois Attorney General Lisa Madigan -- oppose the structure. They say it relies on ld technology that would cause more damage to Lake Michigan fish than a modern system requiring cooling towers. The dispute over the plant was kept alive earlier this year when a federal appeals court threw out an Environmental Protection Agency rule that Wisconsin regulators relied on in approving the water intake structure. Discussion of the project came after Wisconsin Energy announced third-quarter earnings rose 17 percent, boosted by higher collection of fuel costs from its customers, as well as customer growth.

The contested water intake structure led to a series of questions from analysts about whether construction of the coal plants would be delayed if the utility is required to build cooling towers. "It seems this process has been going on. It seems to be a slight overhang on the stock," said Andrew Levi of Brencourt Advisors in New York City during a company conference call with stock analysts. Wisconsin Energy executives said plant construction would be delayed a year or more if the utility is required to spend $300 million to build cooling towers for the Oak Creek plant. But Chairman Gale Klappa and Executive Vice President Rick Kuester said that isn't likely to happen.

"We feel pretty confident with our argument, and we think the (judge) will see it our way," Kuester said. "If not, we'll take it to appeal." After a hearing last week before administrative law Judge William Coleman, a decision is expected by the end of November, Klappa said. Meanwhile, construction of the $2.3 billion project is 42 percent complete, with construction of the water intake pipe virtually finished, Klappa said. A new coal-handling facility that would serve both the existing Oak Creek power plant and the new pro ect is almost finished, as well. Company executives say they believe their method of drawing water from Lake Michigan is environmentally more sound than cooling towers because it would draw in less lake water and result in fewer emissions of carbon dioxide, the leading greenhouse gas.

But national environmental groups and the Illinois attorney general have weighed in against the use of so-called once-through cooling systems and in favor of cooling towers, resulting in a legal victory for the environmental group Riverkeeper in a close y watched federal court case earlier this year. Katie Nekola, energy program director at Clean Wisconsin, said her group and others have been raising questions about the legality of the water intake structure since the project was first proposed several years ago. "Ratepayers shouldn't be on the hook for the cost of the cooling towers if that should prove necessary," she said.

The Milwaukee-based utility holding company reported net income rose to $83 million, or 70 cents a share, from $71 million, or 60 cents a share, a year ago. Profit from continuing operations was 71 cents a share, 3 cents higher than the average of eight analysts surveyed by Bloomberg News. After earnings were announced Thursday, Wisconsin Energy shares closed down 9 cents at $47.11. So far this year, the shares have lost 1 percent in value, compared with a 4 percent gain for the S&P 400 Utilities Index. Customer growth also helped earnings, the parent company of We Energies said. Sales of electricity have risen by 0.8 percent so far this year, including 3.6 percent growth by residential customers, 2.9 percent growth by small-business customers and 0.1 ercent growth by large industrial and business customers.

Natural gas sales are up 10 percent so far this year.

Wisconsin Energy Corp. 3rd quarter percent 9/30 2007 2006 change Sales $881.5 $839.8 +5.0 Net income 82.9 70.8 +17.1 EPS (diluted) 0.70 0.60 +16.7 9 months Sales $3,089.1 $2,901.2 +6.5 Net income 241.3 239.4 +0.8 EPS (diluted) 2.04 2.02 +1.0 Excluding discontinued operations, earnings per share were $83.1 million or 71 cents in this year's quarter, compared with $70.8 million or 60 cents last year. For the nine months, earnings from continuing operations were $241.9 million or $2.04 per sha e, compared with $234.9 million or $1.98 per share a year ago. Figures in millions except for earnings per share.

Percentages are based on unrounded sales and income figures.

The POWER REPORT

PowerMarketers.com · PO Box 2303 · Falls Church · VA · 22042

To subscribe or visit go to: PowerMarketers.com PowerMarketers.com@calcium.netcontentinc.net