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January 06, 2009
Dynegy Abandons Plans to Build Five New Coal Power Plants
    by Robert Kropp

Houston-based energy company has been target of Sierra Club campaign and criticism for exposing shareowners to risk.

Dynegy, a Houston-based owner and operator of power plants that has been a target of widespread criticism for its plans to build seven coal-fired power plants, has dissolved its joint venture with LS Power and abandoned its efforts to build at least five of the plants.

Dynegy, called the "The next King Coal" by the National Environmental Trust, has been the target of a Sierra Club campaign aimed at stopping the proposed construction of the plants.

According to the Sierra Club, coal is one of the most polluting sources of energy available, jeopardizing health and environment. Coal-fired power plants are also major contributors to global warming, accounting for almost 40% of the nation's carbon dioxide pollution, the prime global warming pollutant, as well as 26% of energy-related methane emissions.

Added to concerns over environmental factors was a report issued by Innovest and entitled Dynegy: Coal Expansion Poses Risk to Shareholders. In the report, Innovest asserts that "Despite the likelihood that Dynegy's proposed coal-fired power plants will face significant CO2 costs and shifts in consumer demand toward alternative forms of power generation, the company has not demonstrated how it will protect shareholder value and guarantee a return on investment for the development of over 5,800 MW of new coal capacity."

In a press release issued by Dynegy, CEO Bruce Williamson acknowledged the likelihood of a new regulatory landscape for polluters in 2009, saying, "Today, the development of new generation is increasingly marked by barriers to entry including external credit and regulatory factors that make development much more uncertain."

In order to dissolve the joint venture, Dynegy will pay approximately $19 million in cash to LS Power during the first quarter of 2009 to reflect the relative value of assets exchanged. Dynegy will record a loss in 2009 related to the transaction.


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