Longview Power sees quick bankruptcy exit, plans gas and solar builds
Wednesday, 22 April 2020 10:51 AM ET
The Longview Power coal-fired plant in Maidsville, W.Va., is undergoing its second bankruptcy process in less than a decade.
Source: S&P Global Market Intelligence
By Fotios Tsarouhis
The 700-MW Longview Power coal-fired plant in West Virginia will continue to be operated by namesake parent company Longview Power LLC after it emerges from bankruptcy, CEO Jeffrey Keffer said in an interview with S&P Global Market Intelligence. The company’s main focus in the coming years, however, will be developing and financing a 1,200-MW gas-fired facility and a 70-MW solar project.
Longview Power’s 700-MW coal-fired project in Monongalia County, W.Va., which sells its output into the PJM Interconnection market, financially struggled this winter as warmer-than-usual temperatures depressed power demand. The company filed for Chapter 11 bankruptcy protection for the second time in less than a decade earlier in April, filing a prepackaged reorganization plan with the U.S. Bankruptcy Court for the District of Delaware on April 14.
We really started working [on the bankruptcy] in late January when we realized that we weren’t going to have any kind of winter energy price boost,” said Keffer. “It was just such an unseasonably warm winter, if anything, pricing for us was running less than half of what we normally see.”
With the Longview Power plant reliant on price bumps in the winter months, mild temperatures made it impossible for the company to repay its debts.
Ownership of Longview Power LLC, which is ultimately owned by Longview Intermediate Holdings C LLC, will be transferred to senior secured lenders, over 90% of whom back the plan, according to Keffer. The agreement of the creditors “really gives us the assurance that it’s going to happen rapidly” he said in the interview, noting that a confirmation date for the reorganization plan is set for May 21. “It’s pretty much in and out of bankruptcy.”
The company previously filed for Chapter 11 bankruptcy protection alongside its coal-mining affiliate Mepco Holdings LLC in August 2013 after becoming unable to pay back construction loans for the $2 billion coal plant. The federal bankruptcy court in Delaware approved the restructuring plan for that bankruptcy in March 2015. The Mepco mines adjacent to the Longview Power plant that supplied it with coal were shuttered in 2018.
Development of gas-fired, solar project goes on
Keffer’s role is expected to remain unchanged as Longview Power once again seeks construction debt, this time for its 1,200-MW Longview Power Clean Energy Center, a combined-cycle gas-fired facility.
“We expect to finish permitting on the gas-fired plant by the first quarter of next year,” said Keffer. “The lenders see some real value in that and an opportunity and, because of that, they left the two companies that we were utilizing for developing those projects outside of the bankruptcy.”
While the gas-fired and solar projects will also come under the ownership of Longview Power LLC’s creditors, they have been isolated from the bankruptcy and will continue with permitting as the bankruptcy case proceeds, said Keffer, who remains optimistic that the beleaguered natural gas sector will recover by the time the Longview gas-fired project is in late-stage development.
“Well, of course, it’s anybody’s guess what’s going to be happening in the near term with the pandemic and when the country can get back on its feet,” said Keffer, though he pointed to a decline in natural gas exploration and production even before the coronavirus lockdown as a development that could create enough scarcity to bump up gas prices just as a number of gas-fired facilities are scheduled to come online in coming years.
“We see gas prices moving up next year,” said Keffer. “They’re very, very low now, so now would not be a good time to be trying to finance a gas plant.” However, by the time Longview Power LLC’s project is ready to hit the project finance markets in late 2021, he expects a sunnier outlook.
Permitting on the gas-fired plant should wrap up by the first quarter of 2021 with the project expected to be financed with a mix of debt and equity. “Generally we would expect 40% equity, 60% debt, if that’s still available, that would be ideal,” said Keffer. The project is expected online by 2024.
“One of the advantages of building the gas plant is we have to create laydown areas, large flat areas that would lay out all the equipment that we then install in the plant,” said Keffer. “West Virginia is a beautiful state with wonderful and amazing resources but it does not have an abundant resource of flat land, but we’re creating it with a gas plant.”
Some of the laydown areas for the construction of the gas-fired plant in West Virginia will then be used to install solar panels, with the 70-MW Longview Power Clean Energy Center Solar project being built in stages at several project sites totaling 300 acres on both sides of the West Virginia-Pennsylvania border, including sites that straddle the border.
“To be able to get solar [renewable energy credits], it needs to be a Pennsylvania interconnected facility,” said Keffer. With the interconnection in Pennsylvania, the project can qualify for those RECs if a majority of the panels are located within the state, according to a clarification Longview Power LLC sought from the Pennsylvania Public Utility Commission.
The solar project will be built in several phases, with the panels set to be located solely in West Virginia, at the gas-fired project’s construction site, being the last that will go online. Ultimately, 20 MW will be located in West Virginia, with the other 50 MW in Pennsylvania. Longview Power LLC will sell the solar project’s output via a power purchase agreement.
The West Virginia Public Service Commission signed off on both its portion of the solar project and the gas-fired project earlier in April. With both new projects sitting on reclaimed land, the site of a surface mine a half-century ago, Longview’s project campus in Maidsville, W.Va., is being rebranded the “Longview Power Clean Energy Center.”
As for the original Longview project, it will trudge on. The price of coal will continue to decline, said Keffer, though he maintains that an existing coal-fired plant, or at least Longview, can continue to play a role in supplying needed generation. “Coal is a hedge against gas and you don’t need a large movement in gas prices to make the coal plant very, very profitable,” he said.
This article was published by S&P Global Market Intelligence.