Longview coal plant, one of US newest, files for bankruptcy, again

Longview Power, the operator of the 700MW Longview Power coal-fired power plant in Monongalia County, West Virginia, announced on Tuesday that it was filing for Chapter 11 bankruptcy protection.

This is the second time in the company’s less-than 10 years of operation that it has had to file for bankruptcy protection, after filing in August of 2013 (PDF) due “in large part because [it had] been plagued by design, construction, and equipment defects and failures.”

This time around, Longview Power, the project-financed entity that operates the coal plant, cited “lessened demand for electricity due to long term power-pricing pressure caused by cheap natural gas, an unseasonably warm winter, and the COVID-19 pandemic and resulting economic impact, which collectively have severely depressed power prices.”

“This filing is unfortunate but necessary given the current depressed power prices, which have further dropped more recently due to the terrible COVID-19 pandemic sweeping the nation and dramatic effects of the pandemic on the economy,” said Longview Power CEO Jeffery Keffer.

“We are fortunate to have strong support from our senior secured lenders who under the plan will become our owners and provided needed financing. As a result, we are not planning any changes to our staffing, we expect to pay vendors in the ordinary course during the Chapter 11 process, and we will continue to operate as productively as ever.”

Keffer also explained that the company did “not anticipate any change in the development of the Longview natural gas and solar projects”, neither of which were included in the Chapter 11 filing, sitting in stark contrast with the Longview Power coal plant.

The somewhat ironically named plant has been the constant focus of attention since its inauguration back in 2011, and was championed by then-Energy Secretary Rick Perry in 2017, claiming the plant was “incredibly important to the future of this country” and that “there’s not a lot [of coal plants] like it.”

Longview Power CEO Jeffery Keffer explained last year that “We’re able to produce electricity more efficiently than any other coal plant in our region, the PJM region,” adding that “We’re able to do it at lower costs than just about any other fossil fuel that includes gas-fired plants.”

Conversely, however, Longview Power has been one of American credit rating agency Fitch Ratings’ “Top Loans of Concern” since August 2017, while S&P Global Ratings downgraded the company on March 20 over the “virtual certainty” of revolver default.

Longview Power’s protestations aside, the added burden of the COVID-19 pandemic and an unseasonably warm winter are only the last straws to break this camel’s back.

Already this year investment bank Morgan Stanley published a report claiming that nearly 50GW of US coal-fired power capacity will be unable to financially compete against renewable energy sources by 2024, and advised US utilities to prepare retirement plans for their coal plants which would need to be replaced with cheaper renewable projects.

A separate Morgan Stanley report, published in December, claimed that anywhere from 70GW to 190GW of US coal-fired generation is “economically at risk” from the deployment of a “second wave of renewables” across the country. This figure excluded 24GW worth of coal-fired generation which was already on the cards to be retired.

“We think that the economics make sense that the utilities in general should be pursuing this just because it seems to benefit everybody,” Morgan Stanley analyst Stephen Byrd said in a February phone interview. “It benefits shareholders, customers and the planet.”

While Longview Power may be able to claim economic comparability, the demand for coal itself is another problem the company must contend with.

Earlier this month S&P Global Market Intelligence revealed that US coal production over the first quarter of 2020 had fallen to its lowest level since 1981. This fell in line with figures from the Energy Information Administration (EIA) published around the same time which showed that US coal production during the fourth quarter of 2019 fell 8.9% on the previous quarter, and 14.3% down on the same quarter a year earlier.

Longview Power claims that it “is the most efficient and lowest cost coal-fired power plant in [the PJM Interconnection region] and one of the most environmentally compliant and cleanest coal plants globally.”

This being true, Longview is also preparing to invest in alternate energy technologies, and its “Longview Power Clean Energy Center” plans to integrate “three highly advanced clean coal, natural gas, and solar electrical generation facilities to reliably supply over 2000MW of low cost electricity to northern West Virginia and southwestern Pennsylvania.”

This includes not only the 700MW Longview coal-fired power plant, but a 1,270MW combined cycle natural gas plant and a 70MW solar facility.