Business: International Power plots California move Source: The Observer Publication date: 2001-02-11

BRITISH generator International Power is planning to cash in on the Californian energy crisis by building power stations there and reaping rewards from high prices. The international arm of former UK generator National Power sees a long-term opportunity in California because the state does not have enough generating capacity to meet soaring internet-fuelled demand for electricity.

Wholesale electricity prices in California have leapt from an average $30 to hundreds of dollars per megawatt hour, threatening to ruin utilities in the state, which cannot pass on the increased costs fully to consumers.

International Power chief executive Peter Giller told The Observer last week that he had sent a team to California to seek possible sites and prepare the ground for future contracts in the hope of building up to 3,000 MW of generating capacity there. This is more than IP currently has in its existing American plants in Texas, Georgia, Massachusetts and New Jersey. It has four further plants under construction in the US, along with stations in Europe, Asian and Australia.

Giller said: ' There is something like 60,000-70,000 MW of plant there, so I would look at about 3,000, which would give us about a 5 per cent market share.' He said he would fund construction costs by signing forward contracts with energy users. Contracts totalling between $10 million and $15m would make construction viable, he said.

He added that stringent environmental and planning laws in California - blamed as a key reason for the lack of new plant being built in the state - could make the process difficult.

But last Friday state governor Gray Davis introduced a fast-track approvals process for new power stations as part of a plan to increase the state's output by 5,000MW.

Giller also made it clear that he saw Europe as a growth area. The blocking of a pounds 9.7 billion merger between Spanish giants Endesa and Iberdrola, which would have put some 5,000MW up for sale, meant that IP would focus more on Italy than Spain in the future.

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-- Martin Thompson (mthom1927@aol.com), February 11, 2001