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Power, renewables buyers hunt returns; Post-election coal stock rally fades

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Power, renewables buyers hunt returns; Post-election coal stock rally fades

Top news

Flush with cash, power and renewables buyers find returns in scale, aggregation

What happens when energy dealmakers, flush with cash, see a market with limited investment opportunities? The answer, increasingly, is to either accept lower returns or channel some of Wall Street's creative spirit to match big funds with bigger ideas.

Critics say FERC needs more data on Mountain Valley project

Agencies, local governments, environmental groups and individuals voiced concerns to FERC about missing information in the draft environmental impact statement for the proposed Mountain Valley natural gas pipeline project.

Post-election coal share rally fades at year-end

A surge in share prices of major U.S. coal companies that followed the election of Republican Donald Trump in early November has largely faded at year-end, with stocks even or lower than they were in the days after the campaign ended.

Power

* Just days after FERC conditionally approved its plan to purchase several thousand megawatts of mostly natural gas-fired generating plants in the U.S. from Engie, Atlas Power Finance LLC, a joint venture of Dynegy Inc. and Energy Capital Partners LLC, filed a proposal for addressing any market power concerns stemming from the transaction.

* A group of Democrat senators, including Sheldon Whitehouse from Rhode Island and Bernie Sanders from Vermont, are asking President-elect Donald Trump's EPA nominee, Scott Pruitt, to explain his ties to the energy industry ahead of a Senate confirmation vote early next year. The senators also asked Pruitt, who now serves as attorney general of Oklahoma, to explain his role in the establishment and operation of the "Rule of Law Defense Fund," among other things.

* Innovative Solar Systems LLC said it is in the process of selling 500 MW of its next portfolio of utility-scale solar projects, which range from 20 MW to 100 MW. The projects are also touted to "have great rate of return" 25-year power purchase agreements, according to a company statement.

* Net-metered capacity reported to the U.S. Energy Information Administration by utilities and third-party owners increased from 8.9 GW in 2014 to 12.8 GW in 2015, or 43% year over year, according to data filed with the agency on a voluntary basis.

* Massachusetts Gov. Charlie Baker's administration has decided to move forward with plans to implement a possible 600-MW energy storage mandate by 2025 for merchant utilities within the state. The Department of Energy Resources, or DOER, has deemed it is "prudent for the Commonwealth to set targets for energy storage systems," according to a Dec. 27 letter from DOER Commissioner Judith Judson that was sent to state lawmakers.

* Heartland Biogas of San Diego is challenging a decision by Weld County, Colo., officials to shut down its $115 million bio-gas power plant over odor limits, The Denver Post reported. In its lawsuit, the company is seeking monetary damages against the county and reinstatement of its special review permit. The plant is capable of producing 20 MW of electricity.

Natural gas/midstream

* Environmentalists are skeptical of Exxon Mobil Corp. CEO and Secretary of State designee Rex Tillerson's change of stance on climate change and call it just a "P.R." stunt, as the U.S. oil giant has "done little or nothing to help put carbon taxes into effect," according to The New York Times. However, some believe that Tillerson's "ostensible support" for a carbon tax and the Paris climate accord could go in his favor during the Senate confirmation vote.

* The U.S. oil and natural gas sector could see as many as 40 IPOs through 2018 given the recovering oil prices and a deregulatory push in Washington, Tudor Pickering Holt & Co. CEO Maynard Holt told Bloomberg News. "The number of companies expressing interest in going into this window is really high, and the number of investors saying we'd like to see something different is really high," Holt was quoted as saying.

* Centennial Resource Development Inc. has closed its acquisition of leasehold interests and related upstream assets in Reeves County, Texas, from Silverback Exploration LLC for about $855 million, subject to customary post-closing adjustments. Centennial also closed a private placement of $910 million worth of equity securities with certain accredited investors, including Riverstone Holdings LLC and affiliated funds.

* Raymond James analysts anticipate a 30% increase in capital spending by U.S.-based exploration and production companies next year as they prepare to boost production to take advantage of higher oil prices. That has prompted banks to extend credit lines and increase the borrowing base for the shale drillers, Reuters reports.

Coal

* Because of changing market conditions, Great River Energy 's 1,141-MW Coal Creek baseload coal-fired plant in McLean County, N.D., no longer is needed to operate at full load around the clock, so it has returned to its "cycling" roots. When the plant began cranking out electrons in 1979 about 50 miles north of Bismarck, N.D., Great River Energy, a Maple Grove, Minn.-based generation and transmission cooperative, did not have enough demand to support all of its output.

* Peabody Energy Corp. continues to garner support from creditors for its recently proposed reorganization plan. As of Dec. 28, additional holders of about 25% of the company's outstanding senior secured second-lien notes and about 25% of its outstanding senior unsecured notes became parties to the plan support agreement, backstop commitment agreement and private placement agreement. "The plan has gained significant additional consensus among Peabody's senior bondholders as we continue to move toward confirmation," Peabody Executive Vice President and CFO Amy Schwetz said in a statement.

* A judge has ordered CONSOL Energy Inc. to pause all coal mining activities near a stream in a Pennsylvania state park until a court has ruled on environmental challenges. The Environmental Hearing Board of Pennsylvania ruled on Dec. 23 that CONSOL should stop activity on a longwall mining operation within 500 feet of the Kent Run creek while the court decides on an environmental dispute filed by the Sierra Club and the Center for Coalfield Justice.

* Westmoreland Coal Co. has announced it is changing its power supply agreement with a subsidiary of Dominion Resources Inc. On Dec. 28, Westmoreland announced it will no longer be under obligation to run the Roanoke Valley Power Facility starting March 1, 2017, and will provide power purchase contracts to Dominion Virginia Power in lieu of using the Roanoke plant to provide contracted energy. Dominion Virginia Power is known legally as Virginia Electric and Power Co.

Commodities

* The weekly natural gas inventory report to be released by the U.S. Energy Information Administration at 10:30 a.m. ET on Thursday, Dec. 29, is expected to show another large withdrawal from stocks for the week to Dec. 23.

* February 2017 natural gas futures were debuting Thursday, Dec. 29, on the negative side of the ledger in profit-taking after gaining sharply alongside the now-expired January 2017 contract that rolled off the board 16.9 cents higher at $3.930/MMBtu. On the heels of a settle up 13.2 cents at $3.898/MMBtu, the fresh front-month contract was last seen 7.3 cents lower at $3.825/MMBtu.

* Following a mixed session on Wednesday, firm demand forecasts should help support power dailies across the U.S. on Thursday, Dec. 29, despite a slight retreat in the natural gas markets. After the January 2017 natural gas contract expired with a 16.9-cent gain to a two-year high in the previous session, the new front-month February 2017 contract pulled back overnight, last trading 7.1 cents lower at $3.827/MMBtu.

SNL Image

New from RRA

* RRA's Financial Focus provides a summary of 2016 publications, which cover utility industry earnings, dividends, capital expenditures, financial quality and share price performance, as well as in-depth company reports.

* On Dec. 28, the Idaho Public Utilities Commission authorized Avista Corp. a $6.3 million, or 2.57%, electric base rate increase effective Jan. 1, 2017, following a settlement. The approved increase is premised upon a 9.5% return on equity and a 7.58% overall return but is silent with respect to other rate case parameters. Separately, Avista on Dec. 23 filed a petition with the Washington Utilities and Transport Commission for reconsideration or rehearing of a Dec. 15 decision in which the WUTC rejected the company's request for electric and gas rate increases.

* Massachusetts' attorney general recently requested that the Massachusetts Dept. of Public Utilities "open an investigation into ways to increase transparency, efficiency and public awareness and confidence regarding the profits that electric and gas distribution companies are allowed to earn" in the state.

Quoted

"At any point, it feels like there is four to five times more capital available than there are opportunities to invest it," said Guggenheim Partners Senior Managing Director Dean Keller, of investment prospects in the power sector.

The day ahead

* Early morning futures indicators pointed to a mixed opening for the U.S. equity markets. To view more SNL equity market indexes, click here. To view more SNL Energy commodities prices, click here.

The Daily Dose is updated as of 7:30 a.m. ET. Some links may require registration or a subscription.