Duke slows work on Vegas power plant

Thursday, Aug. 22, 2002 | 11:09 a.m.

SUN STAFF AND WIRE REPORTS

CHARLOTTE, N.C. -- Duke Energy Corp., the second-largest U.S. utility owner, slowed work on a Nevada power plant and stopped work on two other western plants worth $550 million because they wouldn't be profitable enough amid an expected decline in electricity prices.

The halted plants in Deming, N.M., and Satsop, Wash., were being built by Duke/Fluor Daniel, a construction venture with Fluor Corp., Duke Chief Financial Officer Robert Brace said on a conference call with investors Wednesday. The combined capacity of the projects is enough to light 960,000 U.S. homes.

The company last week slowed construction of a 1,200-megawatt plant about 50 miles northeast of Las Vegas by canceling overtime work, Duke spokeswoman Diana Vavrek said. Half of the plant had been scheduled to open in April 2003 with the rest starting two months later. A plant that size is capable of providing energy for 1.1 million homes a day on average.

About 25 percent of the power produced at the plant would be made available to Nevada Power Co., Las Vegas' primary electrical utility, and the rest would be sold on the wholesale market. The plant would be Duke's first in Nevada.

Vavrek said a new opening date hasn't been set for the $600 million natural gas-fired plant, known as the Moapa Energy Facility.

"We won't know for a couple of weeks" how long it would take to open the plant under the slower schedule, she said.

About 1,000 workers, including those working for project subcontractors, are being affected by the reduction in overtime work.

Mirant Corp. and Xcel Energy Inc. this month halted power projects under construction elsewhere by Shaw Group Inc. Calpine Corp., which builds its own plants, withdrew orders for 35 turbines in the first quarter and is considering canceling 85 more.

"This confirms that a power glut, financing problems and worry about prices is a broad-based issue, no matter how big or small a producer is," said Sanders Morris Harris Inc. analyst David Yuschak.

The average price of electricity in the California-Oregon border region had fallen 88 percent this year to $25.38 a megawatt-hour from the same period a year ago.

"These plants take only about two years to build, compared with the six years it used to take for a coal plant," Yuschak said. "It may be cheaper for companies to delay a partly completed plant until they see power prices turning up."

Duke in the first half had completed 11 plants that can produce 6,000 megawatts.

Duke expects to spend $6.8 billion on power plants and other capital projects this year, and $4 billion to $6 billion in each of the next two years, Brace said. The company needs to spend $2 billion in each year on maintenance, and will decide later whether to spend the rest, he said.

Bloomberg News contributed to this report.