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Navajo supplier Peabody Energy says coal plant can compete with gas through 2040

Peabody Energy Corp. is touting the findings of a third-party study suggesting that the Navajo power plant can continue to be competitive with natural gas and other coal plants through 2040.

Peabody, which recently emerged from bankruptcy reorganization, said the conclusions presented to an Arizona Corporation Commission working group meeting in Phoenix counter suggestions that natural gas render the plant uncompetitive based on a reduced-price fuel proposal Peabody has made. The Salt River Project, the operator of the plant, has said the Navajo coal plant could shut down in 2017. The study was conducted by Navigant Consulting Inc.

Peabody, the coal supplier to the plant, has been arguing to keep the plant open since it was announced owners were considering closing the facility as the plant's current lease with the Navajo Nation is set to expire near the end of 2019. A release from Peabody said the projections include examining the potential for a new plant ownership structure in another aim to keep the plant operating beyond 2019.

The study projects the Navajo station would generate market cash flow savings of $700 million to Arizona ratepayers with variable operating costs below that of nearby natural gas power plants. The study projects a potential for another $160 million in savings through 2040 from non-fuel operating and maintenance cost savings. Peabody highlighted a finding in the study claiming that keeping the Navajo plant would provide for fuel diversity and defend against supply disruptions.

The study calculates the cost of operating the Navajo station to be $392 million in net present value below the cost of market replacement of energy and capacity from 2020 through 2040.

"Peabody's fixed-price proposal represents a very competitive cost of fuel versus alternate generation sources and demonstrates our commitment to finding solutions that will keep the plant operating for the foreseeable future," said Peabody President for the Americas Kemal Williamson. "We are helping to advance a plan with our other stakeholders to make NGS one of the most competitive baseload generating stations in the region and provide reliable, low-cost electricity for the benefit of Arizona, and the Navajo Nation and Hopi Tribe."

SNL Energy fuel contract data does not list any other power plants that buy coal from Peabody's Kayenta mine, the primary supplier of the plant.

Peabody said both the Navajo Nation and Hopi Tribe have expressed support to find a way to keep the plant operating.