Sithe cancels New York power plant project citing market uncertainty
Sithe Energies Inc. Friday canceled a 510 Mw peaking power plant at Ramapo, New York. Analysts said this could be the first of many such projects to be canceled nationwide given the current jittery capital market and the outlook for electricity prices.
By the OGJ Online Staff
HOUSTON, Dec. 14 -- Sithe Energies Inc. Friday canceled a 510 Mw peaking power plant at Ramapo, New York.
The independent power company cited uncertain economic conditions and development climate in the particular New York region as cause for the cancellation. "No single factor was the determinant," said Jim McGowan, senior vice-president.
Analysts said this could be the first of many such projects to be canceled nationwide given the current jittery capital market and the outlook for electricity prices. The energy sector has been rocked by investor and creditor uncertainty following the recent bankruptcy protection filing by crippled energy giant Enron Corp.
"You are seeing the trend that started last summer continuing," said Paul Freemont, an analyst with Jefferies & Co. in New York. "It just moved an additional step impacting plants where money has been spent."
Freemont said he was certain that more companies will be canceling power plants further along in the development process as companies assess the costs and future returns given current pricing levels. So far, most companies have scaled back capital expenditures on new power plant development. The Sithe plant is among the first to be canceled that was well along in the development pipeline.
Meanwhile, New York state regulators say there is still a need for new power plants. "We need more energy," said Edward Collins, spokesman for the New York Public Service Commission. "I would not draw any statewide negative conclusions from this one cancellation, though."
Collins said that state regulators fully expected some cancellations since about 20 new power plants had been proposed for the state."It's a competitive situation so not all of the projects will come to fruition," he said.
The Ramapo plant, originally an 827 Mw combined cycle facility, experienced challenges from local residents over water use and air emissions. The company scaled back the plant to a 510 Mw peaking unit in response to the issues raised by local residents.
The new design would have consumed the same amount of water on an annual basis as a typical single family, the company said. Sithe is 49.9% owned by a unit of Exelon Corp., Chicago, with the remainder owned by by foreign power companies and Sithe management.