The Houston Chronicle reported on January 2:

Stingy credit markets and high regulatory hurdles have spurred Houston-based Dynegy to step back from new coal-fired power plant projects by ending a joint venture with LS Power Associates.

Dynegy will keep the right to expand its 27 existing coal, natural gas and oil-fired plants in 13 states, and it retains stakes in a pair of Texas and Arkansas coal projects.

But Dynegy will pay New York-based LS Power $19 million as part of the split and let it take full ownership of new projects under consideration in Arkansas, Georgia, Iowa, Michigan and Nevada.

Shares of Dynegy closed up 38 cents, or 19 percent, to $2.38 on Friday.

Dynegy Chairman and CEO Bruce Williamson said the power plant development landscape has changed since the company entered into the joint venture with LS in the fall of 2006. Funding new projects is much more difficult given the worldwide credit crunch and the possibility of new climate change legislation under the Obama administration.

“In light of these market circumstances, Dynegy has elected to focus development activities and investments around our own portfolio where we control the option to develop and can manage the costs being incurred more closely,” Williamson said in a statement.

Here is the Waterloo-Cedar Falls Courier’s take on the story:

The future of a proposed coal-fired power plant near Waterloo became a little cloudier Friday when Texas-based Dynegy Inc. announced that it and New Jersey-based LS Power Associates were dissolving their joint venture to develop that plant and others in several states.

The move transfers to LS Power full ownership and developmental rights associated with various “greenfield” projects in several states, including the 750-megawatt Elk Run Energy Station proposed for construction northeast of Waterloo.

[…]

Separation from Dynegy puts the Elk Run plans in doubt, said Don Shatzer, a member of Community Energy Solutions, which opposes the Elk Run Energy project.

“LS Power has no experience developing/operating coal plants and so is unlikely to proceed (without) a new partner,” Shatzer said in an e-mail note.

Bruce Nilles, director of the Sierra Club’s National Coal Campaign, shares Shatzer’s opinion, according to The Houston Chronicle.

This sounds quite promising, although neither the Houston Chronicle nor the Waterloo-Cedar Falls Courier were able to get a comment from LS Power on whether it will continue to pursue this project.

Incidentally, the Waterloo plant is not needed to meet Iowa’s energy demand; most of the electricity the plant would have generated would have gone out of state.

Many thanks to all those who have worked hard to prevent this plant from being built, notably the Waterloo-based grassroots organization Community Energy Solutions, the Sierra Club Iowa chapter, Plains Justice of Cedar Rapids, and the Iowa Environmental Council (with which I am involved).

Well-organized activists helped prevented LS Power from annexing some farmland for the coal-fired plant.

In March 2008, the Iowa Department of Natural Resources denied a construction permit for the project. Apparently the county zoning for that land was not in order, so the DNR concluded that LS Power “hadn’t met our requirement to have the full ability to put the power plant on that property.”

These small victories were not themselves enough to kill the project. However, the setbacks delayed the process until “external credit and regulatory factors that make development much more uncertain” prompted Dynegy to walk away.

Lesson for environmental activists: it is worth exercising every legal option to put up obstacles to a bad project.

Lesson for Alliant, which wants to build a new coal-fired power plant near Marshalltown: Dynegy’s stock shot up 19 percent in one day after they pulled out of the joint venture with LS Power. The market favors abandoning new coal projects. Dropping your plans to build a power plant near Marshalltown would not only be good for public health and the environment, it could boost your stock price.