CHICAGO – Ohio-based American Municipal Power Inc. – a part-owner of the bond-financed Prairie State Energy Campus – has received a subpoena from the Securities and Exchange Commission tied to the project, according to public documents obtained by an environmental group.
AMP – which has a 23% interest in the controversial coal-fired project -- has not disclosed the SEC subpoena in any of its Municipal Securities Rulemaking Board filings and the agency did not return calls Friday to comment.
The information came from city of Cleveland documents released Friday by Ohio Citizen Action. The SEC, which does not require an issuer to disclose the receipt of a subpoena, declined to comment.
The group received the documents Friday from Cleveland’s Public Records Administrator in response to a request sent Feb. 24 via email by its executive director, Sandy Buchanan. The group sought copies of any documents held by Cleveland Public Power, the mayor’s office, and the Cleveland Department of Finance “related to the Prairie State coal plant…from Nov. 1, 2012 to the present.”
The request was made just days before the disclosure in regulatory filings by Peabody Energy Corp. — the company that led efforts to develop the joint power agency-owned project— that it had received a subpoena from the SEC regarding the project’s development.
The southern Illinois coal-fired plant has come under fire for construction delays and cost overruns that drove up the price for energy beyond what public utilities had expected to pay when they bought into the project.
Public utilities in Illinois, Indiana, Kentucky, Missouri, and Ohio issued $4.5 billion of debt, some it under the federal Build America Bond program, to finance their participation. Peabody initially sponsored the project and still owns a small stake along with two rural power cooperatives.
AMP disclosed the subpoena in an a memorandum dated March 7 to Prairie State participants from AMP-Ohio’s senior vice president general counsel John W. Bentine. It was among the documents released by Cleveland to Ohio Citizen Action Friday.
Bentine writes: “AMP received a subpoena titled ‘In the matter of Peabody Energy Corporation’ and are cooperating to provide the information requested. This has had no impact on operations at the generating facility.” The memorandum does not provide any additional details as to the timing of the subpoena or additional details.
Ohio Citizen Action’s Buchanan said the memorandum raises a question over whether AMP ever intended to inform its members of the Peabody subpoena if not for the group’s circulation of stories about it.
“The municipal participants in the project are on the hook for all of the financial risk of the Prairie State project due to the “take or pay” contracts. Don’t they have a right to know if the SEC is investigating?” she said Friday.
Environmental activists in other states where public utilities have a stake in the project have filed similar public records requests, according to the Ohio group. Majority owners include AMP, the Illinois Municipal Electric Agency, the Indiana Municipal Power Agency, the Missouri Joint Municipal Electric Utility Commission, the Kentucky Municipal Power Agency and the Northern Illinois Municipal Power Agency. All six did not return calls to comment after the Peabody disclosure last month. The bonds are secured by payments from over 200 municipal electric utilities in 10 Midwestern states.
Peabody reported it had received the subpoena in January “seeking information and documents relating to the development of Prairie State.”
Moody’s Investors Service last year concluded that while utilities are paying higher than originally anticipated costs for Prairie State power, the long-term economics remain favorable.
The project’s value provides incentive for its joint-power authority owners to continue support, Moody’s said. Strong contracts securing the Prairie State debt provide rating stability and also should help allay investor concerns.
The state-of-the-art coal plant became fully operational in 2012 after some delays. The campus includes a two-unit 1,629 megawatt pulverized coal, supercritical coal-fired generating facility at a site with an adjacent coal mine.
The project’s growing price tag has drawn public and political scrutiny, with some municipalities who are locked into contracts through their participation in local public power agencies calling the project a bad deal.
Higher than projected power costs have fueled the ire of environmental groups who long have warned that even with more advanced controls the plant will still be a major contributor to greenhouse emissions.
A report last year from the Institute for Energy Economics and Financial Analysis, which describes its mission as moving the United States away from coal and other non-renewable energy resources, warned that some local communities in eight states with a stake in the project could face fiscal stress due to the higher rates they now face.
The cost of the project, first estimated at about $1.8 billion, rose to $3 billion and the utilities and project managers in 2010 negotiated a fixed cost of $4 billion. Current costs for the project are estimated at nearly $5 billion, according to published reports.
Last fall, then-U.S. Rep. Dennis Kucinich, D-Ohio asked the Treasury Department to investigate whether it was proper for BABs, which offer a federal interest rate subsidy, to have been used to finance the power plant. Kucinich, who lost his 2012 re-election bid in a primary, complained that the bond issuance was benefitting “a private, multinational energy firm.”
