For Panda Power Funds, Coal’s Losses Breed Opportunity

Publish Date:

Wednesday, October 28, 2015 9:56 am CDT

News Organization:

The Dallas Morning News

Source URL:

By James Osborne

A more than 60-year-old, now retired coal plant in Pennsylvania will be the site of Panda Power Funds’ planned Hummel Station 1,124 megawatt natural gas plant. (Credit: Panda Power Funds)

Coal power is waning in the United States, and Dallas-based Panda Power Funds is cashing in.

The energy finance company announced Wednesday it was converting a more than 60-year-old coal plant atop Pennsylvania’s Marcellus Shale natural gas field into a new 1,124 megawatt gas-fired plant. Panda called it “one of the largest” coal to natural gas projects in the country.

Coal plants have been taken out of service at a fast clip across the country, as tighter environmental regulations and competition from cheap natural gas are changing the economics of the power sector. In June the U.S. Energy Information forecast roughly a quarter of the nation’s coal fleet would retired by 2040.

In its place, a new wave of solar and wind farms and natural gas plants is expected to come online in the decades ahead.

“The natural gas revolution has arrived in the heart of coal country,” Todd W. Carter, president of Panda Power Funds, said in a statement.

To aid that transition, power companies are looking at shuttered coal plants to site new gas turbines. Doing so evades the typically lengthy and costly process of buying up land and obtaining environmental permits from the government.

While NRG and some other power companies have announced so-called “gasification” projects, it’s still early stages, said Travis Miller, an energy analyst with the research firm Morningstar.

But that could change quickly should President Obama’s order to cut carbon emissions from the nation’s power sector – a plan that is expected to hit coal plants particularly hard – hold up in court. Last week Texas Attorney General Ken Paxton announced Texas was joining a 24-state coalition suing the federal government.

Coal to gas conversions ” is a trend we see discussed across the industry but being implemented sparingly,” Miller said. “In the long run, if the environmental regulations stick, then a lot of utilities consider it is a good investment opportunity.”

Panda did not disclose the cost of the new facility. But the firm said it had received more than $830 million in investment from firms including Goldman Sachs and Siemens Financial Services, a subsidiary of the German power giant.

Located near the Shamokin Dam in Snyder County, the Sunbury coal plant was retired in 2014.

Panda’s new converted gas plant – named Hummel Station –  is scheduled to begin operation in early 2018, burning natural gas from the Marcellus Shale to supply electricity to markets including New York City and Philadelphia.

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