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Feb. 28, 2013 /PRNewswire/ -- An independent analysis of the financial performance of Dominion Resources'
Brayton Point power plant in
Somerset, Massachusetts, released today by the Institute for Energy Economics and Financial Analysis, projected a bleak future for the 50-year-old coal-fired facility, the largest remaining coal plant in New England. The report,
Dark Days Ahead: Financial Factors Cloud Future Profitability at Dominion's Brayton Point, found that the once profitable power plant's earnings before interest, taxes, depreciation and amortization (EBITDA) are plummeting due to a perfect storm of market conditions that are projected to continue at least through the end of the decade. The report shows that those conditions make it unlikely that
Brayton Point will ever recoup its recent
$1 billion investment in upgrades to the facility, or return to profitability. The report was commissioned by Conservation Law Foundation (CLF), which has been a regional leader in shaping New England's transition away from coal toward a clean energy future.
The authors will present their findings in a teleconference for press and analysts at 11:00 AM EST today. Registration is required.
Brayton Point is looking at losing money for the foreseeable future," said
David Schlissel, who co-authored the report with financial expert
Tom Sanzillo. "The market conditions have changed and are continuing to change for old coal plants. There is nothing on the horizon that shows that this power plant will be able to return to financial health; in fact, even the most optimistic scenario shows that
Brayton Point cannot produce earnings that would cover its costs and produce a return for equity investors at any time through 2020."
The report points to a set of changed conditions that together are putting severe downward pressure on Brayton Point's earnings, which dropped from
$345 million in 2009 to
$24 million in 2012, a decrease of some 93 percent. The report details the causes for the dive in earnings, most notably, the steep decline in natural gas prices and related drops in wholesale energy market prices and capacity prices.
The report provides two extremely conservative scenarios of future performance: an "optimistic scenario," in which generation from
Brayton Point coal Units 1-3 is projected to rise to a 60% capacity factor through the years 2013-2020, and a "less optimistic" scenario, which assumes that the units' generation will not exceed 40% for any year in the period. In 2012,
Brayton Point's Units 1-3 operated at an average 16% capacity factor. Thus, the report says, earnings from those units could be much lower than projected.
In both scenarios, based on forward-looking conditions, the report shows that it is unlikely that future energy market prices, ISO-NE capacity market prices, plant generation and coal prices will lead to earnings high enough to provide its owner with adequate recovery of capital or return on that investment.