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Dynegy Ready To Sell Morro Bay Plant In Package Deal ( Update – Bids rejected)

February 24,2015

“The Morro Bay Power Plant (MBPP) and power plants at Moss Landing and in Oakland are currently owned by Dynegy. Dynegy is apparently planning to make a complete break from business in California and all three of those properties are up for sale.”

Screen Shot 2013-11-08 at 11.38.51 AMSo says a City of Morro Bay staff report that will be discussed this evening. Staff seeks direction on how to handle the situation that may mean both a new owner and potential new use for the landmark property along the city’s Embarcadero.
In a package deal, Dynegy is believed to be selling three power plant properties that may have as much value as waterfront properties than power plants.

UPDATE: Feb 25,2015  Dynegy posted this message on their website today – “California Strategic Review – The sales process for the California portfolio has been terminated as the bids received were below our view of the portfolio’s value.”

Can City Buy Property For $1?

There is a clause in the current deed that states the City of Morro Bay may purchase the entire MBPP for one dollar, 20-years after power generation stops. (The actual language revolves around a calculation of 15 years after the end of any 5- year consecutive period of the plant not selling or generating at least 876K megawatt hours of electricity – so the time period is effectively 20-years from the date of last production of those megawatt hours.) The start date for that 20 years is likely September 30, 2013. So, whether or not Dynegy sells the MBPP, the City would be able to purchase the property around 2033 for $1, if 876K megawatt hours are not produced at the plant between September 30, 2013 and September 30, 2018. That said, the cost to tear down and cleanup the site is extremely high, perhaps too high for even the Morro Bay of 2033 to afford. There is no requirement for the City to purchase the MBPP at the end of those 20 years.

Looking for a new buyer the city staff report says “The City, elected officials and staff, have been involved in some broad consultation with potential buyers and developers. At this point, none of those buyers have found a business case that has resulted in their purchase of the property. The City remains engaged and reaching out to potential buyers with a special interest in appropriate redevelopment that may result in the removal of some of the most unsightly parts of the MBPP facility.”

Uncertain Future

The city staff report concludes “The MBPP as it currently stands is, and may remain, a significant presence in Morro Bay long into the future. A small portion of the property has been transferred to the City, and the City has received our $525,000 and $80,535 payments from Dynegy. The City will continue to receive the annual $40,000 fire service payment. No other major property or financial transfers are anticipated in the near or medium term future, unless or until Dynegy is able to sell the MBPP. The PG&E switchyard will likely remain in place and operational for generations.

While the City’s land use authority provides measurable influence over future use, the MBPP remains private property and while we can be a partner, we are more in the passenger seat than the driver’s seat – unless we had ~$100M or so handy to buy the facility and property and perform a major environmental cleanup project.”
Unlike the Morro Bay property both the Moss Landing and Oakland facilities may well be used for future power generation since Dynegy  has invested in technology to avoid the “once through cooling system” that has now been now outlawed in the state.The three plants are the 2,529 MW natural gas fired Moss Landing Power Plant, located between Monterey and Santa Cruz on the coast, the 650 MW natural gas fired Morro Bay Power Plant, locate in that city (now closed) and the 165 MW Oakland Power Plant adjacent to Jack London Square.

The city staff report says Dynegy will not consider breaking up the package of all three properties for sale.

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