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Power executives talk coal transition; several seem excited to continue

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Power executives talk coal transition; several seem excited to continue

A reorganized U.S. coal sector is faring much better through the first half of 2017 compared to the past few years, but a shrinking domestic customer base remains a potential concern on the horizon.

When power generators talked about coal on second-quarter earnings calls, many were talking about moving away from the fuel, an S&P Global Market Intelligence review of recent earnings reports found.

While the coal sector has enjoyed a lift from improvements in international demand for metallurgical coal, U.S. producers have historically played a somewhat limited role as a swing supplier to global markets. Without new coal power units, mining companies could be left competing over a reduced pool of customers as plants retire due to age or other factors.

Though regulations have played a role in the closure of many coal-fired power plants, on earnings calls, power executives can often be found touting a transition to other forms of energy as a positive economic and environmental shift. Xcel Energy Inc. President and CEO Benjamin Fowke said the company, which serves the West and Midwest, is transitioning to less carbon-intensive energy with "affordability" in mind.

"I'm really pleased to see some of my colleagues are doing the same thing," Fowke said on a July 27 earnings call. "I think it's the right thing to do. ... That's probably in the 2020s that we will start to really aggressively do that. I am really excited about it."

CMS Energy Corp., principally focused on utility operations in Michigan, closed seven coal plants in 2016. That reduces the coal portion of the company's generation portfolio share from 49% to 22%, a figure that President and CEO Patricia Poppe described as "more coal retired than any other investor-owned utility in the nation" on a July 28 earnings call.

"Our promise to improve the planet is coming to fruition at a rapid rate," Poppe said. "And we aren't finished. Our clean and lean strategy enables further coal reductions without big bets to achieve the replacement."

Alliant Energy Corp. President and CEO Patricia Kampling said by the end of year, the Iowa- and Wisconsin-based utility will have retired or converted 40% of its 2010 coal-fired capacity. The company has also shut down most of its oil and diesel generation in a shift to other forms of energy she said began nearly a decade ago.

"We continue to execute on our strategy by providing cleaner energy for our customers by building a smarter, more robust grid," Kampling said.

Kansas-based Westar Energy Inc. said that despite being "still remembered as primarily a Midwest coal company," gains in renewable and nuclear energy have allowed it to retire its "aging and less efficient" fossil fuel generation. The company is planning to retire a coal-fired unit at the Tecumseh Energy Center and gas-fired units at two of its other plants.

"We expect to retire in 2018 or so an additional 780 megawatts of [fossil fuel] generation we placed in service in the 1950s and '60s," President and CEO Mark Ruelle said on Westar's Aug. 9 earnings call. "Coincidentally, these plants are about the same vintage as many of our baby boomers who are also retiring throughout the company. So we can retire the plants without laying off folks as we need their skills elsewhere."

An IDACORP Inc. executive said its 2017 integrated resource plan guides the Idaho-based company to continue a transition from coal-fired resources. PNM Resources Inc. said its 2017 integrated resource plan showed the most cost-effective resource portfolio presented in the 20-year plan was one that was "coal-free." Great Plains Energy Inc. said that retiring six units would allow the company to cease burning coal at almost 25% of the coal fleet and reduce carbon dioxide emissions. A company executive said the units "served our customers well" but added that retirement was the most cost-efficient way to meet customers' needs.

AES Corp. President and CEO Andrés Gluski said that while its coal plants are under contract, the company is gradually shifting in a "big transition" that involves disposing of some of its coal assets. Ameren Corp. President and CEO Warner Baxter told analysts the utility is "making prudent decisions to close down coal-fired generation" while investing in renewable energy "to effectively transition our generation portfolio."

Algonquin Power & Utilities Corp. President and CEO Ian Robertson said he was convinced that "greening the fleet" in Missouri, Arkansas, Oklahoma and Kansas by transitioning away from coal was best for the long-term public interest. He said he had been pleased to see that other electric utilities are also making filings that "echo the compelling economic proposition associated with the replacement of coal and other fossil fuel-fired generation with new wind generation."

"I think when you look at some of the other filings that have been done, the premise is that with the current [production tax credit] market, the variable costs of coal are higher than the all-in costs of wind," Robertson said. "And it's hard as a utility, which has kind of a fiduciary obligation to its customers, to continue to operate those existing coal plants when there is an opportunity to reduce costs."