By Edward Klump

     April 2 (Bloomberg) -- Dynegy Inc., branded the ``king'' of coal-fired

power plants by the National Environmental Trust, said electricity buyers, not

producers, are dictating the fuel types of new generators.

     Environmental groups oppose Dynegy's coal-fueled plants under development

in Texas, Arkansas and Georgia as out of step with efforts to cut emissions of

so-called greenhouse gases linked to global warming. The Sierra Club organized a 

protest in February outside Dynegy's headquarters in Houston.

     ``They want to focus on the coal,'' Dynegy Chief Executive Officer Bruce

Williamson said yesterday in an interview in Houston. ``They should focus a

little bit on the fact that the toughest thing with a gas development or any

renewable development is finding customers that want that development.''

     Less polluting generation, such as turbines that run on natural gas or

wind, are more expensive than coal. Dynegy, which also has wind and solar power

projects, can only build plants that will yield a return on investment,

Williamson and Chief Financial Officer Holli Nichols said in the interview.

     ``We won't build something unless there's customers that want to buy the

output, and it's not going to be anything that moves forward unless regulators

and communities have their say and it gets the approvals,'' Williamson said.

     Williamson was nominated for an award called Fossil Fool of the Year, given 

by groups including the Energy Action Coalition, Co-op America and Rainforest

Action Network to recognize the biggest contributor to fossil-fuel-related

pollution. He finished fifth in the voting.

 

                            Photo Ops

 

     Williamson said some environmental opponents are more interested in photo

opportunities than in constructive dialogue.

     The goal of the campaign against Dynegy is to demonstrate opposition to the 

company's coal-fueled developments, said Emily Stone, a Houston field organizer  with the Sierra Club.

She said costs for cleaner power sources will drop if investment is made to expand their use.

     ``But what it really takes to make that a reality is big companies like

Dynegy putting their money where it matters and making the right decisions with

their investments,'' Stone said.

     Dynegy's coal-fired projects currently under construction include a

665-megawatt development in Arkansas known as Plum Point and a 900-megawatt

plant in Texas called Sandy Creek. The company, which has power stations in 12

U.S. states, also wants to build a 1,200-megawatt plant in Georgia.

 

                          Slow Process

 

     Environmental opposition is making it more time-consuming to build

coal-fueled plants, Williamson said. He said that's making it tougher to align

the elements of a project that have to come together at the same time: prices,

financing, approvals and construction costs, which are escalating.

     ``I wouldn't be at all surprised to see a lull in new plant development,''

Williamson said.

     With the U.S. already headed toward a shortage of generation capacity, that 

will mean higher power prices and an increase in the value of existing plants,

Williamson said.

     Just as many of the municipalities and other customers that buy power from

Dynegy don't want to take on the cost of the cleanest generation sources,

Williamson said, consumers may not be able to pay for limits on U.S.

carbon-dioxide emissions. Imposing a fee of $30 or $40 a ton on carbon emissions 

would result in sticker shock for utility customers, he said.

 

                           Carbon Cost

 

     ``I don't think the American consumer can take a 30 or 40 percent increase

in their power bill,'' Williamson said.

     U.S. political leaders must provide direction to balance the country's

needs to have affordable energy, protect the environment and reduce reliance on

energy imports, Williamson said. ``We need politicians who are going to be

leaders in Washington,'' he said.

     Williamson joined Dynegy in 2002 and averted bankruptcy by selling assets

and unwinding a failed energy-trading business. After posting losses in four of

the previous five years, Dynegy netted $264 million in 2007.

     The acquisition last year of plants from LS Power Group reduced Dynegy's

reliance on coal-fueled power plants in the U.S. Midwest for profit. About 22

percent of the company's generation capacity is fueled by coal. Most of the rest  is gas.

     Dynegy has said it may use excess cash for new plants, acquisitions, share

buybacks or the resumption of dividends. The company gave itself liquidity and

flexibility with its financial turnaround, Williamson said, and decisions on use 

of extra cash will likely be put off until at least late this year.

 

                         Debt Maturities

 

     Refinancing was done in 2007 -- before this year's decline in credit

availability -- leaving the company with no major debt maturities before 2011,

Williamson said.

     Power plants have sold recently for more than 100 percent of replacement

cost, Williamson said. Dynegy's stock price values its plants at only 55 to 60

percent of the cost of replacing them, he said. The company won't make

acquisitions at a higher price relative to replacement cost than its own assets

are trading, he said.

     Dynegy, which is developing new plants through a joint venture with LS, has 

the capacity to produce almost 19,000 megawatts, enough power for more than 15

million average U.S. homes, based on an Energy Department estimate.

 

--Editors: Tony Cox, Robin Saponar.

 

To contact the reporter on this story:

Edward Klump in Houston at +1-713-353-4879 or eklump@bloomberg.net.

 

To contact the editor responsible for this story:

Tony Cox at +1-713-353-4873 or

acox3@bloomberg.net.