Industry publication, December 2001

NYC 9/11 Public Portal Document

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Power Reaches 3I J

High Plateau Industry shake-out and fuel uncertainties cast { new doubts on long-term development plans

'I s ince 1998, the U.S. has experienced an unprece­ dented and largely unex­ pected boom in new power­ plant construction. Between nounced projects may acm- ally get built. SHAKE-OUT The underlying 2.5 to 3% 1999 and 2001, about 83,000 annual demand growth in Mw of new capacity has come the U.S. market would nor­ on line, adding nearly 10% to mally support additions of the generation base. Another . 25,000 Mw to 30,000 Mw 300,000 Mw to 400,000 Mw of IL per year. That means a sub­ new capacity is in the pipeline, stantial baseline level of virtually all proposed by inde­ new plant construction is pendent “merchant” develop­ still likely, especially in ca­ t ers who have replaced tradi­ pacity-short regions such as tional utilities as the industry’s the West and Northeast. (i driving force. Most analysts also expect a It But almost no one believes shakeout in ownership of that aU of the projected capac­ new merchant capacity, ity will actually be built. Market with a small number of fi­ forces, constraints on available nancially strong players fuel, transmission capacity and consolidating their posi­ financial resources will factor tions as weaker groups strongly. Several late-2001 ana­ fade. lyst reports dismissed “capacity The stunning collapse of glut” worries, claiming that the Enron in November 2001 boom may have already and earlier announcements peaked and wondering how by several other major play­ sharply new capacity de­ ers of more cautious pow­ erplant development strate­ velopment will fall off. For 2002, analysts expect capacity additions to continue I gies increased the sense that the boom was begin­ around 45,000 Mw, about the ning to fade. Officials of * same as 2001. But after that, all developer AES Corp., Ar­

§ & bets are off and most expect a drop-off. The initial predic- tions of high-capacity additions for the 2002-2007 period sim- ■ A - lington, Va., say that they have recognized the new conditions and have be­ come more conservative. g ply cannot be taken at face val- “It now takes a lot more for § ue, says Neil Stein, an analyst our people in the field to with Credit Suisse First Boston. get a new project approved g As few as one in three an- STAYING UP Capacity adds expected to remain stable in 2002. by headquarters,” says a

6«POWERPLANT CONSTRUCTION

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