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May 27-31: Ohio House OKs power plant subsidies; Devon sheds Canadian oil assets

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May 27-31: Ohio House OKs power plant subsidies; Devon sheds Canadian oil assets

A look back at successes and setbacks in the energy industry.

Highs

DEVON ENERGY — Oklahoma City-headquartered Devon Energy Corp. announced May 29 that it is selling its Canadian business to Canadian Natural Resources Ltd. in a C$3.8 billion, or US$2.8 billion, cash deal. "The transaction ... is a win-win deal for both Devon and Canadian Natural, allowing Devon the ability to achieve its objective of exiting Canada and Canadian Natural the opportunity to leverage our economies of scale, our technical and operating expertise and capture significant synergies to add incremental value from these very high-quality assets," Canadian Natural Executive Vice Chairman Steve Laut said. Tudor Pickering Holt & Co. analysts described the transaction as a "modest positive" for Canadian Natural stock. "While the sticker price comes in ahead of recent investor conversations [US$2 billion to US$2.5 billion], financing the deal with [free cash flow] and leverage drives an accretive transaction," the analysts wrote.

CLEAN ENERGY STORAGE — Mitsubishi Hitachi Power Systems Ltd. and Magnum Development LLC on May 30 announced plans to develop a 1,000-MW energy storage facility in central Utah that will combine underground and aboveground clean energy technologies. The broad outlines of what is being billed as the "world's largest renewable energy storage project" call for Magnum, which is headquartered in Utah, to excavate a cavern that would be filled with compressed air. On the surface, compressors would be driven by excess wind and solar power that would push air into the cavern or by electrolyzers that push hydrogen into the cavern where it can be used at a later date. "[W]hen we add gas turbines powered with renewable hydrogen to a hydrogen storage salt-dome, we have a solution that stores and generates electricity with zero carbon emissions," said Paul Browning, president and CEO of Mitsubishi Hitachi Power Systems subsidiary Mitsubishi Hitachi Power Systems Americas Inc.

Between

OHIO SUBSIDIES — The Ohio House of Representatives voted May 29 to approve controversial legislation that would require ratepayers to subsidize the state's power plants. House Bill 6, now before the Ohio Senate, is largely designed to provide financial support for the 908-MW Davis-Besse and 1,268-MW Perry nuclear plants owned by FirstEnergy Solutions Corp. as well as two coal plants operated by Ohio Valley Electric Corp. Certified clean air resources, including nuclear plants, would receive credits of $9/MWh. Utilities also would collect fees of $2.50 per month from residential customers and up to $2,500 per month for other customer classes to subsidize the Kyger Creek coal plant in Ohio and Clifty Creek coal plant in Indiana. The bill also repeals Ohio's renewable energy and energy efficiency standards. American Electric Power Co. Inc. subsidiary AEP Ohio, the trade name for Ohio Power Co., called the latest version of the bill "a positive step in Ohio energy policy."

WILDFIRE COMMISSION — California's Commission on Catastrophic Wildfire Cost and Recovery said in a May 29 draft report that the state's approach to wildfire liability "imperils the viability of the state's utilities, customers' access to affordable energy and clean water, and the state's climate and clean energy goals." The state-appointed panel said California's practice of inverse condemnation, which holds utilities strictly liable for damages related to wildfires ignited by their equipment regardless of negligence, must be reformed. The commission also recommended that the state create a fund to pay the claims of wildfire victims. PG&E Corp. and its utility subsidiary Pacific Gas and Electric Co., which entered Chapter 11 bankruptcy protection in late January, are seeking clarity on wildfire liability before proceeding with a plan of reorganization.

Lows

PILGRIM — Entergy Corp.'s 683-MW Pilgrim Nuclear Power Station in Plymouth, Mass., permanently shut down May 31, largely in response to low wholesale electricity prices and an influx of cheap natural gas. The single-unit nuclear plant had greater difficulty than larger nuclear facilities in absorbing rising operating costs, which worsened after several unplanned shutdowns and a safety valve issue led to increased regulatory oversight. An S&P Global Market Intelligence analysis in February anticipated that 1,517 MW of primarily gas-fired and solar capacity additions would replace Pilgrim's capacity.