Merrill Lynch said in an equity research note that at least 7,000 MW of nearly built power generation has been canceled. In fact, of the 7,000 MW, nearly 75% was more than 20% completed. Another 5,800 MW of already completed plants has been mothballed, and an additional 25,000 MW of proposed generation has been taken off the drawing board.

Despite the reductions, about 59,000 MW of power generation will be added to the power grid this year and another 58,000 MW will go into service next year followed by about 20,000 MW in 2004, said Merrill Lynch’s Sara Nainzadeh.

Companies such as Mirant, Duke, AES, Xcel’s NRG, Teco and most recently Allegheny have been among the main contributors to the cancellation panic. Most of their plants were slated to come online next year.

It’s amazing that the plant builders didn’t see the power glut coming, but the same can be said of companies in just about every other industry, said Nainzadeh. “Demand growth is estimated at 2.4% or about 15,000-18,000 MW/year, so if you consider that supply is going to grow by 30,000-50,000 MW how are the numbers going to fit? Not only are they canceling plants that already are under construction — some of them more than 60% complete — but obviously some of them are going to be built, but aren’t going to run. Some in Texas already have been mothballed,” she noted.

However, Nainzadeh doubts that there will be many more cancelations of plants due to come online next year. “It would be pushing it now because you are looking at plants that are 60-80% constructed. The latest one was the Allegheny plant (540 MW St. Joseph plant in Indiana). They would have realized by the third quarter than they probably couldn’t afford the plant.”

She said 93% of the 7,000 MW under construction but canceled was scheduled to come online next year. Duke Energy has canceled the most generation that already was under construction (about 2,300 MW). Duke said in September that it was deferring indefinitely construction of the 620 MW Grays Harbor Energy Facility in Grays Harbor County, WA, the 1,200 MW Moapa Energy Facility in Clark County, NV, and the 600 MW Deming Energy Facility in Luna County, NM. The facilities were 40% complete.

Other plant cancellations include AES’s 500 MW facility in Tennessee; Allegheny’s 540 MW St. Joseph plant in Indiana; NRG’s 1,200 MW Pike plant in Mississippi; Mirant’s Contra Costa plant in California, Wyandotte plant in ECAR and Mint Farm in Washington; and Teco’s 599 MW Dell and McAdams plants in Arkansas and Mississippi, respectively. The Western Electricity Coordinating Council will see the most megawatts already under construction be canceled (3,290 MW), said Nainzadeh.

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