Dong Energy confirmed that it no longer plans to build the £2 billion (US$3.2 billion) plant with Peel Energy in Hunterston on the Clyde, Scotland, claiming that the recession and falling energy prices brought about the decision. The company also said that it will no longer pursue plans for a similar 1,600-megawatt (MW) facility in Emden, Germany.
Dong's sudden change of plans comes only a few days after E.ON AG announced that it was shelving plans to build the controversial Kingsnorth coal-fired plant in southeast England.
The project was estimated to be worth £1.5 billion (US$2.4 billion). E.ON blamed the decision on the global recession and a fall in electricity demand.
Speaking to IIR Europe, a spokesperson for Dong energy said: "Due to the financial situation, which affects Dong Energy especially on the power production side due to less sale and falling prices, Dong Energy has decided to strengthen its capital structure, which includes reducing investments in the coming years. However, we still continue to provide engineering advice on the plant design. Dong Energy still regards CCS as a promising and reliable technology to reduce the CO2 emission from fossil-fired power plants, and Dong Energy is not pulling out of clean-coal technology. We will continue to operate some of the most efficient coal-fired power stations in the world.
"It is also important for me to stress that the above will not affect DONG Energy's other activities in the UK," said the spokesperson. "Dong Energy is currently constructing the Severn, an 824-MW natural-gas-fired power station in Wales, going into operation 2010. We are also engaged in a number of offshore windfarm projects around the UK waters. This autumn, the Gunfleet Sands offshore windfarm is about to go into operation."
Dong announced that it planned to reduce investments in power-generation projects to help strengthen the company's capital structure. Dong will now invest 1.34 billion euros in 2010, and between 1.34 billion and 2 billion euros in 2011, compared to previous announced figures of between 2 billion and 2.6 billion euros in both 2010 and 2011.
Peel Energy, however, has been quick to defend the viability of the project, claiming that it intends to push the project to the planning process and beyond.
Owen Michaelson, chairman of Peel Energy commented: "We can all appreciate the business drivers behind this decision. We are sorry to lose Dong Energy as an investor on this project but are pleased the relationship will continue through their design services. Ayrshire Power's overall strategy for the project is unaffected by this decision. We have just completed the latest stage of our public consultations with the local community and other key stakeholders, and we now look forward to continuing to progress through the planning process."
Last year, Dong Energy and Peel Energy announced plans to create the plant, consisting of two 800-MW units near the aging Hunterston B nuclear power plant in Ayrshire, which is currently overseen by British Energy Group plc, now part of Electricite de France SA. The company created a joint venture company called Ayrshire Power for the purpose.