Oct 2, 2007 - Knight Ridder Tribune Business News
Author(s): Jeffrey Tomich

Oct. 2--LIVELY GROVE, Ill. -- After years of delays and hundreds of millions of dollars in cost increases, Peabody Energy Corp. and its partners officially began construction of the Prairie State Energy Campus -- a huge coal-fired power plant that will produce electricity for 1.7 million people across the Midwest.

Executives from St. Louis-based Peabody, the world's largest private sector coal company; elected officials; and representatives of public power groups that own a piece of the project were among the hundreds who gathered under a white tent Monday morning at the project site in Washington County, about 50 miles southeast of St. Louis. The ceremony was not unlike one six years ago on the steps of the courthouse in Nashville, Ill., when Prairie State was announced. At the time, the plant was expected to cost $2 billion and begin producing electricity by 2007. Instead, construction is only now beginning after protracted legal battles over the plant's air permit, and the cost has risen to $2.9 billion.

While development of the plant took years longer than anticipated and construction costs have soared during that time, the start of construction represents a significant milestone for Peabody and the future of coal, Gregory H. Boyce, Peabody's chief executive, said in an interview. "It does establish that this new generation of clean coal plants can be built in this country, and for a company that's long on coal reserves, that increases our growth opportunities," he said. Prairie State and the adjacent coal mine will employ 450 people, and the project will create more than 2,000 temporary construction jobs.

Construction will take about four years. The project's owners have agreed to buy more than 90 percent of the plant's output, or 1,435 megawatts. Peabody will retain about 5 percent ownership in the $2.9 billion project -- down from the 15 percent or 20 percent the company originally said it in ended to own. And the owners have yet to find a company to run the plant after Michigan-based CMS Energy Corp. backed out of the group this spring. Except for Peabody, all of the owners are public power groups that buy or generate power for sale to rural electric cooperatives and municipalities. For them, buying a stake in Prairie State represented a better opportunity to lock up long-term, low-cos power than building their own plants or being subject to the whims of the wholesale power market.

"Certainly, there are terrific economies in doing a project of this scale," said Duncan Kincheloe, chief executive of Missouri Public Utility Alliance. In particular, the plant's location next to the coal mine that will supply it with fuel will reduce costs "because so much of the cost of coal is transportation," he said. Meanwhile, a coalition of environmental groups on Friday urged the 7th U.S. Circuit Court of Appeals to stop the project. This summer, a three-judge panel for the court rejected an appeal filed by the Sierra Club and the American Bottom Conservancy, and upheld state and federal regulators' approval of the project.

jtomich@post-dispatch.com -- 314-340-8320

© Copyright 2007 NetContent, Inc. Duplication and distribution restricted.

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