Around the Globe-Americas

Cogema bids for Hanford

French nuclear group Cogema has made an offer to the US government for the Hanford nuclear clean-up project in Washington state which British group BNFL was thrown off in early May. The move indicates the heightened competition that has existed between the French and British groups since BNFL admitted last September to falsifying quality checks on batches of mixed oxide fuel (MOX) manufactured at its Sellafield plant in the UK.

Together with a US partner, Cogema has made a bid for converting 54m gallons of radioactive sludge, liquids and salts into glass blocks. US Energy Secretary Bill Richardson recently terminated BNFL’s contract after the group’s price more than doubled.

Eighteen months ago, BNFL quoted $6.9bn for the Hanford contract, but in April increased this to $15.2bn, citing changes to the project specification and high finance costs. The USA is a key market for BNFL. One of its key targets is to increase profits in the US by 15 per cent.

BNFL is also reported to be in talks with the US uranium agency, Urenco, in an effort to prevent Cogema gaining control of the global uranium enrichment market.

Innovative financing for Dominican

Cogentrix Energy of the US and the UK’s CDC Capital Partners have closed financing on a 300 MW oil-fired power plant for the Dominican Republic. The San Pedro de Macoris (SPDM) plant will be the largest plant in the Dominican Republic, and is expected to come on-line in early 2002.

CDC and Cogentrix are providing equity of approximately $77m for the project. The Inter-American Development Bank (IDB) is providing a partial risk guarantee to wrap $137m of funding in two tranches. This has enabled the deal to exceed the sovereign ceiling for the Dominican Republic, and is the first time that IDB has used a partial guarantee in a sub-investment grade country.

In addition, credit export agencies Hermes, ECGD and KfW are providing cover both directly and through a reinsurance arrangement – the first time such an arrangement has been used by these agencies for a project financing.

SPDM will sell power to the newly privatized utility Compania Dominicana de Electricidad, and will be one of the lowest-cost generators in the island’s deregulated market. Construction of the plant has already started under a turnkey contract won by Siemens.

Churchill Falls stalls over pricing

Work on Canada’s Lower Churchill Falls hydropower project in Labrador has been put on hold for the summer after negotiations between Newfoundland and Quebec broke down.

The key issue is the deregulated electricity market in the USA which has made the pricing of electricity from the project difficult.

The C$6.5bn ($4.4bn) project would add some 3200 MW of capacity to the existing 5200 MW Upper Churchill Falls project built 30 years ago. The new development would involve partially diverting one river in Quebec. Completion is scheduled for 2007.

Newfoundland Hydro started negotiations with Hydro-Quebec in 1998 over the sale of power. Under a long-term power purchase contract, Newfoundland Hydro sells the output of the existing Churchill plant to Hydro-Quebec, which sells the power into the US market at a premium.

CFE pushes plant schedule to cope with rising demand

Spain’s Union Fenosa has been asked by Mexican energy authorities to accelerate construction of the 250 MW Hermosillo power plant in Sonora state to bring it on-line early. The CFE is also reported to have asked other developers to do the same in order to meet faster-than-expected growth in electricity demand in the country.

The Hermosillo plant had an original target completion date of September 2001. Union Fenosa is now examining the possibility of early completion. It is unclear how much acceleration the CFE has requested.

Mexico recently revised forecasts for electricity demand growth to eight per cent per year from six per cent. Year-on-year consumption for 1Q 2000 grew by 7.8 per cent.

Power demand will be met

The North American Electric Reliability Council (NERC) has said in its 2000 Summer Assessment report that power generation and transmission resources in the USA will be able to meet projected demand in most areas. However, it said that hot weather or unexpected outages could put a strain on supplies, and highlighted several areas of concern, including California, Arizona, New Mexico and southern Nevada.

But record high temperatures in some areas have already strained generation resources. A heat wave in California caused the ISO to reach its $750/MWh price cap and operating reserves to fall below five per cent.

News digest

Brazil: The Rhodia group’s Brazilian subsidiary is to invest $200m in the construction of two power plants of 150 MW and 100 MW in the Sao Paulo state cities of Paulinia and Santo Andre. The plants will be fired by Bolivian natural gas under a deal between Rhodia and Comgas.

Brazil: State-run power utility Furnas and the Wholesale Energy Market (MAE) have reached agreement on solving Furnas’ accumulated debt problems. Furnas will increase its energy generation to cover its debts with concessionaires. From September to December 1999, Furnas’ debt with concessionaires totalled R$170m ($93.4m).

Canada: Nineteen qualified bidders for the July auction of 12 power purchase agreements (PPAs) in the deregulated Alberta power market have been identified. The PPAs will allow them to sell the output from power plants in Alberta and the auction is designed to redistribute market power without forcing outright sales of the plants.

Canada: The Ontario government has imposed a moratorium on the sale of coal-fired generation plants pending an environmental review. Ontario Power Generation (OPG) will not be able to make planned sales of 4000 MW of capacity until further notice. The capacity sales were to have been completed by November 2000, when the Ontario market is due to open to competition, in order to reduce OPG’s market dominance.

Chile: Spanish power company Endesa said that it has agreed to buy Chilean mobile phone operator Smartcom as part of its diversification into telecoms. The deal will give Endesa a foothold in one of Latin America’s fastest growing wireless markets, and will also serve as a platform to expand into neighbouring countries.

USA: The proposed merger of PowerGen plc of the UK and LG&E Energy Corp. has received the approval of the Kentucky Public Service Commission, LG&E’s home state. The merger is due to close towards the end of 2000, and still requires the approval of the Virginia State Corporation Commission, shareholders in each company, FERC and the US Securities and Exchange Commission. It will create a power company with assets of nearly $12bn and revenues of $8.7bn, serving over 4m customers.

USA: FPL Energy has selected Black & Veatch to provide engineering, procurement and construction services for a simple cycle plant being added to the Doswell, Virginia generating site. The unit will be used as a peaking unit, and will consist of a GE model 7FA turbine burning gas and fuel oil. It is scheduled for operation in June 2001.

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