Old power plant values soar in supply squeeze

By Lisa Lee

NEW YORK (Reuters) - The North Lake power station, its stacks merely landscape for the Texas vista as it sat idle for a number of years, now churns natural gas to power for homes in Dallas County.

The TXU TXU.N power plant is one of many across the country that has been restarted as America's growing appetite for electricity and increasing opposition to new plants are producing favorable economics for these power plants.

Add interest from private equity firms looking to spend their mountains of cash in the power sector and you have a sellers' market.

"We are really in the forefront of a market where the value of incumbent assets is rising very dramatically," Bruce Williamson said this week at the Reuters Energy Summit.

The North Lake power plant was revived last year and brought an additional 531 megawatts online last month to meet growing power demand, after being shuttered in 2004.

"There's been capacity that has been shuttered, plants mothballed, construction halted mid-way," said Angela Uttaro, analyst at OppenheimerFund which has $258 billion in assets under management. As power prices rise, she added, it makes sense to restart those plants.

The rapidly accelerating drive to tackle global warming combined with soaring construction costs are making power plants, especially coal-fired ones, more difficult to build. Coal-fired power plants are the largest emitters of carbon dioxide, the greenhouse gas widely blamed for global warming.

Even as plans for new coal-fired power plants stall and the prospect of new nuclear generation nearly a decade away, demand continues to grow as Americans hunger for such items as iPods, personal computers and plasma televisions.  Continued...