REPORT: Dynegy Protecting Itself from High Risk Purchase of Illinois Coal Plants; Plans to Pass Risk to Illinois Communities

Illinois Pollution Control Board to Hear Dynegy’s Request to Not Comply with Illinois Clean Air Law until 2020 In Gamble on Future Energy Markets

CHICAGO–(ENEWSPF)–September 13, 2013.  Today, ACM Partners, an independent financial research firm, released the findings of a report on the pending no-cash sale of five central and southern Illinois coal-fired power plants from Ameren to Dynegy, a Texas-based energy company. The independent analysis found that Dynegy is preparing for the high risk of the purchase by creating an unfunded shell company called Illinois Power Holdings to operate the coal plants locally. This model protects the profits of polluters like Dynegy, while forcing Illinois communities to bear the risk when the financial model fails.

“Our report found that Dynegy’s shell company model is designed to protect company shareholders, while creating a high risk scenario for the Illinois communities where the company plans to operate,” said David Johnson, Financial Expert with ACM Partners and Report Author. “Based on our analysis, the Illinois shell company will not have the proper capital to adequately operate these coal-fired units. This capital covers daily maintenance and operation expenses and future pollution controls. With the high likelihood that Dynegy’s shell company eventually declares bankruptcy, there is a significant risk that workers’ pensions won’t get funded and that local communities will have to shoulder necessary environmental cleanup costs.”

Dynegy, working locally as the unfunded Illinois Power Holdings shell company, has requested a variance from the Illinois Pollution Control Board (IPCB) to have until 2020 to comply with the Illinois State Multi-Pollutant Standard, a law established in 2006. The company claims that complying with Illinois’ common-sense clean air standard will cause the company undue financial hardship. The company is hinging the final sale agreement with Ameren on the IPCB’s variance decision.

The Respiratory Health Association estimates that this variance alone would cause 2,000 asthma attacks and 125 premature deaths in Illinois.

“Dynegy knew the financial risks of burning coal in Illinois, so they entered this agreement to buy Ameren’s coal plants with eyes wide open,” said Kady McFadden, Field Organizer with the Sierra Club Beyond Coal campaign in Illinois. “To claim that the company will face financial hardship by complying with vital clean air standards is a false claim by a known polluter. Illinois families are ready for clean air, not more polluters shirking responsibility to clean up.”

The report also found that Dynegy’s shell company structure has the potential to set a dangerous precedent for other corporate acquisitions. This precedent would allow any company seeking to acquire assets subject to costly environmental regulations to structure an acquisition vehicle that will be undercapitalized and in financial distress, and rely on that to then apply for a variance. 

“A variance for Dynegy could have real, damaging consequences for a state standard that was developed to give Illinois cleaner air and less polluted communities, said Andrew Armstrong, Attorney with Environmental Law & Policy Center. “Put plainly, Illinois’ air quality will be better if these plants are cleaned up now, and not in 2020. Dynegy’s request that the IPCB green light its gamble on power price recovery is inappropriate.”

“Dynegy’s dodgy shell company structure and missing timeline for cleaning up our air worries our families in Peoria,” said Joyce Blumenshine, a Peoria resident who lives close to the E. D. Edwards coal-fired power plant and a member of the Central Illinois Healthy Community Alliance. “These polluters are just like Ameren: they have no plan for clean air and no commitment to the community.”

The IPCB will hold a hearing on Dynegy’s variance request on Tuesday September 17 at the Illinois Environmental Protection Agency building at 1021 N. Grand Avenue East in Springfield, Ill.

To view the full report, please visit: http://action.sierraclub.org/site/DocServer/ACM_Partners_Expert_Commentary_Report_-_IPH_Transaction_.pdf?docID=14101

Source: sierraclub.org