The September 15, 2010, Bond Buyer headline confidently declared “Final Prairie State Deal Looms” announcing that the nine municipal consortium owners – MJMEUC among them – will have to pony up another BILLION dollars to cover the cost overruns on this ill-fated coal-fired power plant. Calling this the “final deal” was just way too optimistic.
Don’t confuse this article about the additional debt necessary to cover the colossal cost overruns on the Prairie State plant which was exposed by the Chicago Tribune in July, with the Kansas City Star’s expose on September 8th, of the colossal cost overruns that will have to be covered on the Iatan 2 power plant, another of MJMEUC’s ill-advised high-risk investments.
These belated reports on the true costs of both Prairie State and Iatan 2 plants, and the accelerating cost of the megawatts both plants will eventually generate, should make for interesting discussion at the next MoPEP meeting when CEO Kincheloe and CFO Loethen try to explain to their members that finding their share of the Prairie State BILLION dollar cost overrun to add to the billions in debt they already have and doubling the cost of the power it produces is....no big deal?
MJMEUC owns 12.3% of PS and has already invested over $600 M in the project. Because they are owners the joint venture MJMEUC/MoPEP members will have to throw in about another $60 million to cover their share of the cost overruns at this stage of construction which is still less than 50% complete. There is no telling how astronomical the cost per megawatt will finally be when the last 50% of the plant is finished because from here on it’s all cost overruns!
At the next MoPEP meeting CEO Duncan Kincheloe will stumble through some admin-babble explanation to the utility managers, mayors and city administrators who are used to having smoke blown up their noses and have unquestioningly swallowed all the sunshine construction reports they have been getting for years from CEO Duncan Kincheloe and his Project Manager Vern Kincheloe. Will any of these gullible MoPEP members wonder if their MJMEUC/MoPEP investment in PS, which was supposed to produce $35 MW power, is still cost effective at $64.40 per MW?
How high does the price have to go before they realize they’ve been had - $75, $85, $100 per MW? Which of MJMEUC's other power investment gambles will be the next to report billions in cost overruns that the Kincheloe Family construction reports haven’t mentioned?
Finally someone - an IMPA official in this article - admitted what anyone with a grain of common sense (that automatically excludes everyone who voted for a MoPEP contract) knew, “For all participating agencies, the increased costs will ultimately mean higher electric rates for municipalities and other customers that buy their power from the agencies.”
The article quoted MJMEUC CFO Mike Loethen as saying MJMEUC/MoPEP plans to issue additional debt to cover its increased costs, although those numbers have not yet been finalized. “The immediate need for funds is not there yet, but we may enter the market before the end of the year to take advantage of the BAB program,” Loethen said.
The “immediate need is not there yet?” Which “immediate need” is Loethen talking about? The “immediate need” to borrow more millions to cover Prairie State cost overruns, the “immediate need” to borrow more millions to cover the Iatan 2 cost overruns or the “immediate need” to cover the cost overruns for the remainder of both the Prairie State and Iatan 2 construction?
Even leveraging the usual first lien on the utility revenues of their newest member, the City of Lebanon, and cashing the check for Lebanon's join-up fee of $550,000 won’t begin to cover the ante-up on these plants and even if it did there are all those lawsuits. There is the one by Kennett and Poplar Bluff against MJMEUC because Duncan allegedly stole their Plum Point transmission rights and gave them away to other members - that one may cost MJMEUC millions. Then there are the class action Hancock lawsuits against Hermann, Marceline and Salem that MJMEUC/MoPEP members haven’t been told about. If successful those will permanently cripple MJMEUC’s ability to squeeze unlimited rate increases out of their obtuse MoPEP captives. The bond rating agencies aren’t going to like that one at all.
MJMEUC's upside down pyramid of debt that teeters precariously on top of 35 little rural Missouri towns just gets bigger….and bigger….and bigger….
The Bond Buyer – Final Prairie State Deal Looms
Agencies Gear Up For Coal Plant Sale
By Caitlin Devitt and Yvette Shields Wednesday, September 15, 2010
CHICAGO — Public power agencies in Indiana and Ohio plan to return to the market this month with their final borrowings for the Prairie State coal-fired plant project that has risen in cost by more than $1 billion to $4.4 billion.
The nine power agencies that own a stake in the Prairie State Energy Campus will need to come up with more than $1 billion to cover rising construction costs associated with the project, one of the only new coal plants being built in the U.S. more…
