Luminant, Texas' largest electricity generator, has applied to "suspend operations" at its Martin Lake coal-fired plant near Tatum. If the request is approved by grid operators, it will result in the loss of 750 megawatts hours, or enough to power about 750,000 homes. A Luminant spokeswoman says the plant would go offline in December and return to operation in June, in time for summer heat and peak demand.
Citing declining wholesale power prices, Luminant says it "does not make economic sense to operate a unit at a financial loss." The move, it added, has nothing to do with environmental regulations. It was a "purely economical decision."
Luminant can ill-afford to suffer further losses. Taken private in the biggest leveraged buyout in history, the purchase of then TXU was a bet on soaring gas prices, which set the marginal price for electricity. The company's fleet of cheaply run (compared to natural gas) coal-fired power plants were, KKR and Goldman Sachs believed, genuine moneymakers in an age of high natural gas prices. Prices, of course, have stabilized at around $3.50 per million British Thermal Units, a fraction of what they were when they buyout guys closed the deal. Now the profit margins on those coal-fired plants are razor thin, to the point that during six months of the year, they lose money.
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Energy Future Holdings has suffered quarterly loss after quarterly loss ever since the buyout, paying in interest as much as 60 cents of every dollar it has earned. Its power generating holding company now owes far more than its worth.
In a story Tuesday, Bloomberg reported that EFH's lenders are hashing out a pre-negotiated bankruptcy in which the lenders would reduce the debt in exchange for a bigger stake in the company.
This isn't the first power plant Luminant has partially shut down for the slow winter and spring months. About this time last year, it applied to idle two units at its Monticello coal-fired power plant, taking 1,200 megawatts off the grid. It'll do it again this year. That was all against the backdrop of the fight it was having with the EPA, whose regulations it and Governor Rick Perry claimed would force the company to shut down power plants.
Looks like the market is doing EPA's work for it.