FutureGen Scrapped

On Wednesday the DOE announced a restructuring of the FutureGen project. The initial goal of the project is to demonstrate cutting-edge carbon capture and storage technology in order to advance clean coal power plants. Last year the Department of Energy agreed to spend $950 million to develop the project with FutureGen Alliance, a coalition of coal and oil companies. But this week's announcement cancelled this agreement and issued a new direction requesting a 2009 budget of $648 million for clean coal research.

According to Deputy Secretary Clay Sell, a projected increase of $1.8 billion in the original plan was the reason for the restructuring. The new plan "protects the government's exposure and ensures that it is financially and politically viable," stated Sell.

For the FutureGen Alliance this was a disappointing outcome, as they had lobbied hard for the project demonstration site to be located in Illinois.

According to the Associated Press, Wyoming Gov. Freudenthal, "It's kind of like they invited all of us to go to the prom, picked the date, and then canceled the dance. It seems to me - the absurdity of it - it could only be the federal government that would do this."

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DOE - Fossil Energy Techline
The Wall Street Journal - Environmental Capital
C/Net - Green Tech Blog

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clean coal

Nation’s First Environmental Control Bond Issue

The Nation’s first issue of “Ratepayer Green Bonds” is a cost-effective solution to the national predicament of financing environmental compliance costs. U.S. and European investors snap up bonds at record low interest rates. Utility companies across the U.S. expect to spend billions on reducing environmental pollution and meeting new regulatory standards.

Saber Partners, a leading Wall Street financial advisory boutique, has successfully served as the chief advisor to the Public Service Commission of West Virginia (PSC) in completing the nation’s first Environmental Control Bond issue, which was launched on April 3rd and closed yesterday. The bonds lowered the cost of funding environmental control equipment by approximately $130 million when compared with traditional utility financing methods. More bond issues are likely to follow in other states as governments enact stricter environmental regulations.

The new type of “ratepayer green bond” is a “market-based” financing technique that can significantly reduce the cost to customers when coal-burning utilities comply with strict environmental standards affecting the climate. The proceeds will finance the costs of reducing mercury emissions, smog, acid rain and other air pollutants. The bonds are the result of a special statute passed by the West Virginia state legislature and implemented through a financing order issued by the state’s PSC. The bonds are groundbreaking because, while they are issued by the electric utilities, they use the powerful regulatory authority of the state to guarantee repayment of bonds through a surcharge to the utilities’ customers. The offering is also innovative because neither the credit of the electric utilities, nor the credit of the state, is affected by the financing. The bonds provide investors with a safe and secure investment and lower the costs of financing environmental compliance substantially and significantly.

The taxable deal, which totaled US$459.3 million, consisted of two “ratepayer green bond” issues for two units of Allegheny Power (NYSE: AYE) that provide service in West Virginia. The issues are rated triple-A, the highest credit category available – by the top three U.S. bond ratings agencies – and were sold to investors in the U.S. and Europe at record low rates. The proceeds will be used to finance necessary environmental equipment at Allegheny’s West Virginia Ft. Martin coal-burning power plant. The equipment reduces mercury emissions, smog and acid rain – a pressing objective for West Virginia and the nation. Allegheny and the PSC, working through Saber Partners, worked together in an unprecedented level of collaboration and cooperation to bring the “ratepayer green bonds” to market.

Jon W. McKinney, Chairman of the PSC of West Virginia, said, “I am delighted to have worked with Saber Partners and its CEO, Joseph Fichera, the chief advisor to the PSC, on this innovative bond financing. Our ability to secure the lowest possible costs for the bonds and complete the transaction in record time reflects the firm’s expertise, integrity and commitment to their client and to the people of West Virginia.”

Joseph Fichera, CEO of Saber Partners, said, “We are honored to have this opportunity to assist West Virginia in leading the nation by implementing an innovative way to get low cost funds for important projects affecting the climate. The bonds solve part of the escalating costs utilities and their regulators face in meeting government environmental standards, without overly burdening electricity customers.”

“Because coal is an important part of America’s energy future, finding low-cost ways to raise funds to make coal more environmentally friendly is a national imperative. Regulators, governmental officials, electricity customers and investors all share in the environmental and economic benefits of this deal. The environment is enhanced, jobs are created and protected, and investors get a safe and secure long-term investment.”

- The deal helps to achieve public health and environmental benefits to satisfy regulations from the state and the Environmental Protection Agency. The goal is to reduce mercury and other emissions that create smog and acid rain.

- The bonds lower the cost of funding the emissions control equipment by over $130 million when compared with traditional utility financing methods.

- The financing will also lead to the creation of jobs to build the equipment and will promote the use of West Virginia-mined coal in power generation. The state is one of the leading producers of this essential commodity for coal-fired plants.

- The transaction will serve as a model of cooperation between the public and private sectors to protect customers’ interests and the environment.

The deal was divided into a $344.5 million senior secured issue to benefit Monongahela Power Co. and a $114.8 million issue to benefit The Potomac Edison Co. Each deal carried four sinking fund tranches of four, 10, 16 and 20-year average life maturities. Members of the underwriting team include First Albany Corp., Bear Stearns, Loop Capital Markets and Scotia Capital. Credit spreads on the bonds (the amount investors charge above U.S. Treasury securities in order to purchase the bonds) were the lowest ever of any similar top-rated security sold by utilities.

See the Source:
Saber Partners, LLC

DOE OKs OUC Plant Under the CCPI

April 3, 2007 – The DOE announced the signing of a Record of Decision under the Clean Coal Power Initiative (CCPI) which clears the way for construction of a clean coal-fired power plant co-owned by Southern Power Co., the Orlando Utilities Commission (OUC), and Kellogg, Brown and Root, utilizing innovative and efficient technology to reduce air pollution emissions. The DOE will provide $235 million in funding towards the construction of the $569-million, 285-megawatt coal gasification plant near Orlando, FL.

The Florida plant will use an integrated approach of coal gasification-combined cycle technology along with state-of-the-art emissions controls technology to reduce emissions, particularly mercury and CO2 and produce clean energy.

See the Source:
Fossil Energy Techline

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How coal-fired power plants can substantially reduce NOx emissions using selective catalytic reduction.

EU’s Environmental Endeavors

The U.S. Senate Committee on Finance heard the testimony of Ambassador John Bruton this week, outlining the European Union’s energy policy objectives.

With the goal of reducing greenhouse gas emissions and limiting energy dependency, the Ambassador stated several EU policies such as energy taxation, the EU emission trading system, and a plan for sustainable coal technologies.

"Although EU energy policy is far from being created from scratch - a number of energy efficiency and renewables promotion measures date back more than 10 years - it is just recently that the EU has opted for a comprehensive, integrated and ambitious policy set in the field of energy and fight against climate change," said Ambassador Bruton, Head of Delegation of the European Commission to the United States, during testimony.

He continued "the EU’s increasing dependency on imports threatens not only its security of supply but it also implies higher prices, if, for example, the price of oil rises to $100 per barrel in today’s money, the EU's energy import bill will be around 50 percent higher by 2030. While Europeans would have to pay a lot more for their energy, few additional jobs in the EU would be created this way. In contrast, boosting investment in energy efficiency, renewable energy and new technologies has wide-reaching benefits and would contribute to the EU’s strategy for growth and jobs."

Addressing the common situation of the EU and United States’ energy situation, Ambassador Bruton concluded "…that in order to ensure a sustainable, secure and competitive energy supply, a common response is needed."

See the Source:
Ambassador Bruton’s testimony

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Edwards Calls For Cleaner Use Of Coal As Part Of Fight Against Global Warming

Calls for Ban on New Coal Plants Lacking Technology To Capture Carbon Dioxide Emissions

San Francisco, California – Following last week's announcement of his plan to halt global warming and create a new energy economy, Senator John Edwards today released the details of his plan to burn coal cleanly and store its carbon dioxide emissions safely. Edwards called for an end to the construction of any new coal-burning power plants that lack the technology needed to capture their carbon dioxide emissions.

"Global warming is not an issue for the future," said Edwards. "It is a crisis that demands action from us today. We have the chance to create an energy revolution in our country, but if we're going to have that happen, we have to be willing to take action now. We need to be smart and responsible about how we use coal, so we can leave our children and grandchildren a safer and cleaner planet."

While Edwards' energy plan calls for investing in renewable energy and efficiency, he understands that the U.S. is likely to rely on coal for its energy needs for decades or even centuries. Coal-fired power plants generate more than half of our electricity, but cause a third of U.S. carbon dioxide emissions. Utility companies are planning to build more than 150 coal-fired power plants in the next 25 years.

Edwards believes we need to find a way to use coal without heating the planet. As president, Edwards will require that all new coal-fired plants be built with the required technology to capture their carbon dioxide emissions, so plants built today will be able to permanently and safely store their carbon emissions tomorrow. He also committed to investing $1 billion a year in research and testing to jumpstart the means to store large amounts of carbon dioxide safely underground.

In order to halt global warming, Edwards last week called for a dramatic reduction in carbon dioxide emissions. Edwards' plan would cap greenhouse gas pollution starting in 2010, and reduce it by 15 percent by 2020 and 80 percent by 2050, as the latest science says is needed to avoid the worst impacts of global warming. Edwards also proposed major investments in renewable energy and laid out ways to help Americans conserve energy.

See the Source:
A New Strategy For Coal: Achieving Energy Independence & Stopping Global Warming

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About low-temp selective catalytic reduction to reduce NOx emissions at coal-fired power plants.

Climate Change is Top Priority of London Plan Review

London – March 5, 2007 -- Mayor of London Ken Livingstone announced that his London Plan Review will set radical new objectives for planners and developers that will require new developments to connect to “decentralized” local energy supplies and achieve the highest standards of sustainable building design. The Review also doubles the carbon emission reductions that developments must achieve through onsite renewable energy from 10% to 20%.

The London Plan Review also proposes to set carbon dioxide reduction targets – a 20 per cent reduction by 2015 and a long-term target of a 60 per cent reduction by 2050. This is the first time that statutory carbon reduction targets have been set for London.

The Mayor is proposing a series of new development, transport and energy policies all with the aim of making London an exemplary and sustainable world city, adapting to inevitable climate change and reducing future carbon emissions.

These new policies are published in a document entitled Draft Further Alterations to the London Plan which the Mayor is publishing today for consultation with the London Assembly and the Greater London Authority functional bodies, before a formal public consultation stage this autumn.

The Mayor said:'London should lead the way in showing the world how one of its greatest cities is planning to meet the challenges of climate change. We have already succeeded through the London Plan in introducing a target of 10% carbon reductions through on-site renewable energy generation and I would like to congratulate those developers and planners who have responded positively to this challenge. In more and more cases we are meeting – and sometimes exceeding - the existing policy requirements but we still need to do much more.'

'The new policies I am publishing today set tough but deliverable targets for reducing our carbon emissions. We must move our cities away from relying on inefficient centralized heat and power generation, and stop constructing buildings that waste heat and electricity. In London we want to see the widespread use of decentralized energy, the highest standards of green building design and renewable energy incorporated wherever we can.'

'In London I am proposing a challenging new target for our developers and planners.’

The Draft Further Alterations to the London Plan also sets out a series of complementary policies to achieve carbon dioxide reductions and the Mayor will be working with boroughs and other agencies to:
- ensure that development is located, designed and built for the climate that it will experience over its intended lifetime and is capable of adapting to new uses.
- increase the cost effectiveness, and provide incentives to use the technologies which will help address climate change.
- procure and use building materials more responsibly.
- manage flood risk through policies on the location, design and construction of development, and management of surface run-off including rainwater harvesting.
- minimize overheating and the ‘heat island’ effect, for example by encouraging green roofs and walls and designs which reduce solar gain.
- minimize the movement of waste including the introduction of new targets for composting and recycling the different waste streams and giving preference to technologies which produce renewable hydrogen over incineration.

Last week the Mayor published Supplementary Planning Guidance on Sustainable Design and Construction to guide developers and planners on how to use the existing policies to best effect in addressing the consequences of climate change.

Other key proposed alterations to the London Plan, also published today, include:
- Support for the already published proposals to increase housing provision across London.
- Measures to make more effective use of existing and already planned transport capacity.
- Provision for the Olympic and Paralympic Games and associated regeneration of large parts of East London.

A clearer geographic framework for coordinating the strategic policies of a range of pan London agencies and integrating these with local action at the sub regional level.

Action to make London a more livable and socially inclusive city such as the East London Green Grid, improvements to safety and security, and increased play provision.

Refinement of some of the economic policies to support London’s global business area, the Central Activities Zone, and help rejuvenate the economies elsewhere in the city.

A more focused approach to town centers and retailing including the particular need to develop the capacity of the West End as a global shopping and leisure destination.

“Decentralized energy” involves using combined heat, power and cooling systems and renewable energy, as the most efficient way to supply heat and power to domestic and commercial buildings. Typical decentralized energy systems are over 85% efficient, compared with average centralized power generation which wastes two thirds of energy input and is the single biggest source of carbon emissions.

In working towards a long term reduction of carbon dioxide emissions of 60 per cent by 2050 he has set the following minimum targets for London (against a 1990 base):
- 15 per cent by 2010
- 20 per cent by 2015
- 25 per cent by 2020
- 30 per cent by 2025

These targets are practicable providing all stakeholders, including government, work together.

Existing commercial and domestic buildings contribute approximately 73 per cent of carbon emissions in London. The Mayor recognizes the cost implications of these new technologies and will support measures to drive down costs such as stimulating their supply chains.

Most changes to the London Plan are minor amendments to clarify points or to take account of new information. Most of the proposed significant policy changes reflect issues raised in the Mayor’s Statement of Intent published in December 2005. In substantive terms it is the group of new policies associated with climate change in Chapter 4A which represent the most significant Further Alterations.

The Further Alterations to the London Plan are the result of a focused review based on the Mayor’s Statement of Intent to review the plan. Factors which this took into account included:
- a duty to keep the London Plan under review
- responding to new evidence
- taking into account the results of the Sub Regional Development Framework Process
- extending the plan period from 2016 to 2025 and
- taking account of national legislation and policy in the recent planning system reforms.

See the Source:
London Government

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How energy emissions can be made cleaner using low-temp selective catalytic reduction

TXU to Set New Direction As Private Company

Public Benefits Include Price Cuts, Price Protection, Investments in Alternative Energy and Stronger Environmental Policies

Dallas, February 26, 2007 – TXU Corp. (NYSE: TXU), a Dallas-based energy company, together with Kohlberg Kravis Roberts & Co. (KKR) and Texas Pacific Group (TPG), two of the nation’s leading private equity firms, and Goldman Sachs & Co., a leading global investment bank, announced today the execution of a definitive merger agreement under which an investor group led by KKR and TPG will acquire TXU in a transaction valued at $45 billion. GS Capital Partners, Lehman Brothers, Citigroup and Morgan Stanley intend to be equity investors at closing.

As a result of this transaction, the newly privatized company will deliver price cuts and price protection benefits to electric customers, strengthen environmental policies, make significant investments in alternative energy and institute corporate policies tied to climate stewardship.

Stronger Environmental Policies and New Investments in Alternative Energy
- Planned coal-fueled generation units reduced from eleven to three, preventing 56 million tons of annual carbon emissions $400 million investment in demand side management initiatives Transaction endorsed by Environmental Defense and Natural Resources Defense Council Increased commitment to exploring renewable energy sources and investing in alternative energy technologies

Corporate Leadership and Climate Stewardship
- Former U.S. Secretary of State James A. Baker, III will serve as Advisory Chairman to the investment group of new owners William Reilly, Chairman Emeritus of the World Wildlife Fund and former EPA Administrator, will join board of directors and lead effort in making climate stewardship central to corporate policies

- Donald L. Evans, former U.S. Secretary of Commerce; James R. Huffines, Chairman of the University of Texas Board of Regents; and Lyndon L. Olson Jr., former Texas State Representative and former U.S. Ambassador to Sweden, will join the board of directors
TXU will create an independent Sustainable Energy Advisory Board comprised of individuals who represent the following interests: the environment, customers, Texas economic development and ERCOT reliability standards.

The acquisition of TXU by the investor group will be accompanied by an environmental focus that will make TXU a leader in conservation and energy efficiency, creating a fundamental change in the Texas electric market. In addition, the company’s new strategic direction will seek to achieve top environmental News Release performance in the industry and greater involvement and dialogue with environmental, government and community leaders.

C. John Wilder, chairman and chief executive officer of TXU Corp., said, “This is a momentous event for our company in our long journey to transform TXU from a former integrated monopoly to high performance businesses. The new ownership and business structure will enable us to better meet the growing energy needs of Texans. The long-term capital, expertise and resources of the investor group will allow us to increase our focus on reliability, lower prices, outstanding customer service and innovative products, and investments in long-term environmentally sound technology. TXU is a proud Texas corporate citizen, and the company will continue to operate with the same commitment and dedication to serving Texas.

“KKR, TPG and the rest of the investor group are all world-class investors who bring valuable experience in the industry. With these long-term and very informed investors, we can execute a new strategy that will allow us to reshape TXU’s program to build new electric generation units,” Wilder continued. “Our new strategy will meet two important objectives: addressing Texas’ immediate and future energy and reliability needs; and doing so in a manner that responds to the desires of policy makers and other key stakeholders to incorporate new technology advancements and conservation.”

Henry Kravis, founding partner of KKR, said, “TXU has outstanding employees dedicated to meeting the increasing long-term energy needs of Texas. We have listened to the various TXU constituencies, including customers, Governor Perry, Lt. Governor Dewhurst, Speaker Craddick, members of the Texas Legislature and those expressing environmental concerns. As a result, we have developed a new vision with management of how we can turn TXU into a more innovative, customer-centric, environmentally friendly company, and we plan to work with management to implement it. Our experienced energy team looks forward to providing strong support for this transformation, including making substantial, long-term capital investments in new innovation across each business – from customer product and service offerings including demand side management, to generation and grid technologies, and superior risk-management strategies. We intend to hold this as a long-term asset, and we recognize the need to balance growth with environmental considerations.”

Rich Friedman, Global Head of Goldman Sachs' Merchant Banking Division, said, “This transaction serves as a model for long-term environmental stewardship. By investing in new technologies, encouraging conservation and reducing carbon emissions and pollutants, TXU is on the path to being a 21st century power company. We, together with KKR and TPG, are proud to have been able to play a constructive role in the development of the significant environmental elements that help set this transaction apart.”

Stronger Environmental Policies and New Investments in Alternative Energy
Planned Coal Units Reduced from Eleven to Three, Preventing 56 Million Tons of Annual Carbon Emissions

This scale-back represents a 75 percent reduction in new coal capacity. In addition, the company is committed to continuing its efforts to meaningfully reduce existing carbon emissions and seeks to join the United States Climate Action Partnership (USCAP). USCAP is a broad-based group of businesses and leading environmental groups organized to work with the President, the Congress and all other stakeholders to enact an environmentally effective, economically sustainable and fair climate change program. As part of the company’s support for USCAP, TXU is also pledging to support the mandatory cap and trade program to regulate carbon emissions.

To satisfy ERCOT’s requirement for immediate additional capacity to meet the state’s increasing electricity demand, TXU expects to build two coal units at the Oak Grove site and one coal unit at the Sandow site. TXU will immediately seek to suspend the permit application process for the other eight units and withdraw them once the transaction closes. TXU does not intend to apply or reapply for permits to build additional coal units utilizing current pulverized coal-fueled technology.

$400 Million Investment in Demand Side Management

InitiativesTXU will implement an aggressive demand reduction program through a $400 million investment in conservation and energy efficiency activities over the next five years.

Transaction Endorsed by Environmental Defense and Natural Resources Defense Council

KKR, TPG and the investor group are committed to addressing TXU’s environmental issues through substantial new investments in research and demand side management initiatives and a 75 percent reduction in planned new coal capacity. Recognizing this, key environmental groups are supporting the transaction.

Fred Krupp, President of Environmental Defense, said, “This is one of the most significant developments in America's fight against global warming. Environmental Defense commends KKR and TPG for not only dropping TXU's applications for eight proposed coal plants in Texas, but also for the many other commitments they have made to reduce air pollution and global warming emissions, including their support for a mandatory federal cap and trade program to regulate carbon emissions, doubling TXU’s expenditures on efficiency measures and their overall desire to rebuild TXU as a leader in the clean energy economy.

“The debate over this issue has been a top priority for Environmental Defense and we plan to work just as hard with the new TXU to implement this agreement. We also look forward to working closely with TXU as a member of its planned Sustainable Energy Advisory Committee and to settling our federal lawsuit against TXU,” concluded Krupp.

“The NRDC fully supports this transaction and the new company's support for mandatory global warming legislation. This turnaround marks the beginning of a new, competitive focus on clean, efficient, renewable energy strategies to deliver the power we need while cutting global warming emissions,” said Frances Beinecke, President of the Natural Resources Defense Council (NRDC). “It is a big step forward for the State of Texas and for the American energy economy as a whole.”

Increased Commitment to Exploring Renewable Energy Sources and Investing in Alternative EnergyTechnologies

As a private company, free from the short-term financial pressures affecting all public companies, TXU will be able to accomplish important goals for customer service innovation and new generation technology development on a scale and schedule that would otherwise not be possible.

The investor group is grateful for Governor Perry’s commitment to a long-term reliable supply of energy for Texas and his advocacy for investment in clean energy alternatives, such as IGCC. TXU is committed to the development and deployment of advanced technologies with a commitment to exploring IGCC’s potential to meet Texas’ reliability requirements. With the support of the Governor, the company is evaluating the dedication of an attractive site for the exploration of clean coal technologies and partnership with technology leaders.

- TXU will reduce mercury (Hg) emissions, sulfur dioxide (SO2) and nitrogen oxides (NOx) by 20 percent from 2005 levels, as previously committed, through reductions at existing units and installation of emission controls on the new Oak Grove and Sandow units.

- TXU will reduce its own carbon emissions by increasing efficiency of its generating facilities by up to 2 percent.

- TXU will become a leader in providing electricity from renewable sources by more than doubling its purchase of wind power to more than 1,500 MW, maintaining its status as the largest buyer of wind power in Texas. TXU will also promote solar power through solar/photovoltaic rebates.

The company also intends to join the FutureGen Alliance, a non-profit consortium of companies supporting FutureGen, the U.S. Department of Energy project intended to create the world’s first near-zero-emissions fossil-fuel power plant.

See the Source:

Read the complete press release from KKR

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