At $7.90, Mirant has a market cap of $3.166 Billion.
Braincramp, this is one way of looking at some of the
numbers. The $3.166 billion buys you essentially 24,000 MW
of generation: 17000 MW presently, and another 7000 to be
brought on line over the next two years. Heck while we're
at it, why don't we throw in the the Transcanada natural
gas pipleline deal Mirant just closed a few months ago
at this price as well...and for further icing, we'll throw
in a trading operations unit that probably ranks in size
just behind that of Dynergy and UBSWarburg/Enron.
In the article I am including below, get this - Wisconsin
Energy want to build 2800 MW of generation (coal fired)
for a cool $3 billion.
Mirant's market cap of $3 billion will buy you 8 1/2 times
the generation, PLUS some Canadian natural gas fields AND
a transcanadian gas pipeline, AND a good sized trading
operations based in Atlanta.
Is there a possibility that Mirant might just be a little
undervalued here?
Good luck to all. Peter.
Coal Versus Natural Gas 02/10/02
Article by Lee Bergquist in today's Milwaukee Journal Sentinel.
Wisconsin Energy Corp.'s recent bid to bolster power supplies and make the state more reliant on home grown energy will have another effect: more air pollution. Wisconsin Energy is cutting against the grain in the utility industry by proposing to build coal-fired electric power plants while nearly all new sources of electric generation in America are coming from natural gas-fired plants, which pollute less. The utility says it will save customers $1 billion over 40 years by going with a mix of coal and natural gas instead of strictly gas.
The decision underscores an important trade-off that comes when utilities try to improve electric reliability in a state that has been squeezed by tight electric supplies. A traditional coal burning plant will dependably generate electricity for generations, but the pollution it spews creates its own set of problems.
On Feb. 1, Wisconsin Energy asked regulators in Madison for permission to spend $3 billion on new electric generation - a massive project of coal- and natural gas-fired plants that will add 2,800 megawatts by 2012. The utility expects a decision by the end of the year. The project is equivalent to nearly three Point Beach nuclear power plants. Compared with output in 2000, the company will increase electric production by 60%.
But by building a trio of 600-megawatt plants that burn coal in Oak Creek by 2012, Wisconsin Energy will emit more of three kinds of pollution than its current arsenal of plants, according to the company's own figures. While the company says the pollution could be less, its current estimates are:
Carbon dioxide - the main gas linked to global warming - would increase by 42%.
Mercury - a neurotoxin that is especially harmful to young children and fetuses and often ends up in the fish we eat - would increase by 25%.
Particulates - or soot, the fine particles produced from burning coal that are linked to lung and heart problems - would increase by 10%.
Two other pollutants will drop as the company retires an old, inefficient coal plant at Port Washington. Nitrogen oxide pollution will fall 29%, and sulfur dioxide pollution will drop 13%. Nitrogen oxide helps form smog and can have harmful health consequences. Sulfur dioxide, as well as nitrogen oxide, helps form acid rain.
Building power plants is a "delicate balance" involving power production, price and the environment, according to Mike John, a spokesman for Wisconsin Energy Power LLC, a unit of the company that will develop the plants. That's why it tried to marry coal and natural gas. "It's not an environmental-only proposal - we could have done all renewables - but that would have been prohibitively expensive."
The company projects that electric demand will increase by 2.9% annually over the next decade, meaning that if nothing was built the company would have a deficit of more than two Point Beaches. But building traditional coal plants such as those that Wisconsin Energy envisions has become a rarity. Clean air limits, growing concern about the role power plants play in global warming and other factors have seen to that.
"Virtually everything is natural gas," said Chuck Linderman, director of energy supply policy at the Edison Electric Institute in Washington, D.C. In Wisconsin, 1,657 megawatts of new generation built since 1997 is all powered by natural gas and a small amount of wind, figures with the state Public Service Commission show. But Wisconsin Energy's plans call for a major use of coal, with plants coming on line in 2007, 2009 and 2011.
Critics say Wisconsin Energy is making a mistake by choosing an older technology that pulverizes coal and blows it into a boiler where it is burned to produce steam. Environmental groups would prefer that Wisconsin Energy build natural gas plants. "If you are going to do coal, they're building the wrong kind of plants," said John Thompson, an attorney with the Clean Air Task Force, based in Boston. Thompson and groups in Wisconsin, such as Wisconsin's Environmental Decade and the Sierra Club, have pushed for a new technology called "coal gasification," which pollutes considerably less.
A gasification plant is estimated to produce 13% of the sulfur dioxide emitted from a traditional power plant, according to the Gasification Technologies Council. For nitrogen oxide, a gasification plant's savings would be 50%, the council syas.
Coal gasification is a process in which coal reacts with steam and oxygen under pressure and high temperatures. The heat and pressure break up the molecules in the coal and create a chemical reaction that forms hydrogen and carbon monoxide. It's these gases under high pressure that dirve power turbines in the same way as natural gas.
Wisconsin Energy says it will use gasification for its final plant in 2011. Why not earlier? "We do not believe the technology is currently viable," Wisconsin Energy's John said. "We don't want to experiment with our customers. It's a lot of money for guesswork."
Although gasification is used in refineries and at chemical plants, the U.S. Dept of Energy still considers the technology in the demonstration phase for generating electricity. But Linderman of the Edison Electric Institute, a utility industry group, said the gasification process is no longer experimental. ChevronTexaco Corp. has installed two dozen gasification plants around the world in recent years, Linderman said. "If I were in an executive position in the company, I would not hesitate using it," he said.
Gasification plants cost slightly more. He estimated that a pulverized coal plant costs $800 to $1,000 per kilowatt hour, while a gasification plant cost about $1,000 per kilowatt hour. But Wisconsin Energy's John said there are no gasification plants available in the sixe the company envisions. And he said that economics clearly tilt toward the company's approach.
Although natural gas plants are cheaper to build and easier to site, Wisconsin Energy's estimates of $1 billion in lower costs for consumers points to coal's long-term price advantage. Also, Wisconsin Energy believes coal prices will suffer from less gyrations - witness the price drop from 8 to 10 cents per therm a year ago to about 3 cents per therm today. And with an influx of natural gas-fired plants in Wisconsin, "there is going to be a lot of competition" for the commodity, John said.
The $3 billion project favors Wisconsin Energy another way. As an unregulated subsidiary, Wisconsin Energy Power is asking the PSC to a provide a 13.9% return on the investment that will flow through to Wisconsin Electric Power Co., the company's utility subsidiary. That's about a one percentage point higher return than what Wisconsin Electric normally gets, John said. "This is in fact a growth strategy," John said. "The economics certainly play into why we want to do this ourselves rather than have someone else do it." |
