Re: Let's talk about the plant shutdown
One more fact to add to my previous post (pasted below):For each $1 per MMBTU of natural gas price increase, it costs Evergreen about $2 extra per ton of K-fuel produced. (Now don't let that cute little fact cause all you bashers torun out at the same time and accuse me of being an insider; I'm not.).........................................................
Let's talk about the plant shutdown
The shorts would like you to believe that the recent shut down of the Ft. Union plant marks the end of this company, but nothing could be further from the truth. First of all, Evergreen DID NOT dismantle the plant and sell the property. THEY STILL OWN IT, AND THEY CAN START IT BACK UP WHENEVER THE NEED ARISES.
So if K-fuel is such a good product, why did Evergreen shut down the plant? Good question, let's talk about it.
As we all know, Evergreen made a few fundamental design errors with the Ft. Union plant. The biggest error was not spending the money to install a coal fired boiler, which they could have supplied from their backyard coal mine. . Instead, they chose a much lower cost natural gas boiler. At the time it seemed to make sense, given that natural gas prices were still reasonable, and it was MUCH faster than obtaining a coal burning permit. It also kept the plant construction costs down.
Let's look at what happened over the last six months. Late last year natural gas prices were below $6, and currently they are floating around $11.
tfc-charts.w2d.com
Now ask yourself this question: If YOU had an energy intensive business, and YOUR energy costs suddenly rose by more than 80% (with no end in sight) would you think about temporarily shutting down your plant, and reconsidering your fuel source? (Keep in mind that most of the critical K-fuel test burns have already been run by independent customers, with positive test results.)
As we all know, coal BTUs cost a lot less than natural gas BTUs, and that's why power providers prefer low cost coal.. This motivated Evergreen last year to start working on a plan to install a billion+ BTU coal boiler for Ft. Union. The new boiler also has electrical co-generation capability, meaning that the plant will also have the ability to generate it's own electricity. (As we have already learned with Arch's Coal Creek K-fuel plant, obtaining a coal burning permit takes a LONG time, and you have to stay on top if it.)
One of the most significant things Evergreen learned over the past couple years is that they have a viable process that can convert otherwise unmarketable lignite into power plant fuel that sells for prices comparable to sub-bituminous coals. With the price of coal going through the roof recently, the prospects for Evergreen still look very good. Unfortunately the barriers into entry into this new market remain extremely high, but that will also discourage future competition. Evergreen is backed by Sumitomo and Bechtel, and they've got a great product, independently verified by a variety of power producers.
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