West Point lands $400M power plant
By Gary Perilloux
WEST POINT - A Dallas-based global energy firm will build a $400 million electric power plant that will generate 1,300 megawatts an hour and $3 million in annual taxes beginning in 2004.
Panda Energy International Inc. will begin construction early next year on a 170-acre tract in northeast West Point. Proximity to a nearby Tennessee Valley Authority substation clinched the deal, which has been in the works since last summer.
"One of Panda's philosophies is to try to situate these power plants as close to a substation as possible," said Chris Sobol, Panda Energy's manager of business development, who said the plant at Eshman and Industrial Access Roads would sound quieter than a refrigerator to someone standing at the property line. "The bottom line is natural gas comes into one end of this power plant and electricity comes out of the other end by means of incredible technology."
Another bottom line sounded sweet to West Point and Clay County officials: Beginning in 2004, the plant will generate nearly $3 million in annual property taxes, $1.2 million to the West Point Public School District.
Though it ended its 1999-2000 fiscal year with $662,000 in reserves, the district fell $328,000 below state education department guidelines. And in tight fiscal years such as the upcoming one, district officials expect state cuts to limit teacher salaries and class supplies.
"It will ensure ongoing funding for after-school and extended year programs for the children," Superintendent Randy Hamblin said of the power project. "And it will allow us to be more competitive for teacher salaries in the Northeast Mississippi area."
Anatomy of a deal
An 18-month building period will see construction jobs soar as high as 900 and average 500 with an estimated annual payroll of $50 million during that time.
About 45 permanent jobs will average $70,000 per year.
Though the number of permanent jobs isn't large compared to some manufacturers, the power plant will be a huge boon to the tax base and won't have any negative impact on the environment, local officials said.
"All of it was somewhat new to us," City Manager Dewel Brasher said of negotiations that began in the summer. "And the primary question in my mind is we wanted to make sure a development of this nature was environmentally friendly. That was our No. 1 concern."
West Point Mayor Kenny Dill said once that question was answered other pieces of the puzzle fell into place: Panda Energy proved to be a reputable company, with 17,000 megawatts of electric generating capacity under development in the United States and abroad, and West Point had abundant sources of natural gas and water to operate the plant.
Though the city won't receive the property taxes until 2004, "the sales taxes during the construction period will come into our budget and be allocated," Dill said, adding that local businesses and contractors will benefit. "One of the major things you always need funds for is the infrastructure of the community your streets and access and highways."
Schools, hospital and law enforcement also will benefit in future years.
"It will affect everything from running the chancery clerk's office to patching holes in the street," Brasher said.
Dill said no major tax or infrastructure incentives were needed to entice Panda, and the company's managing director, Steve Anderson, said his company won't require state or federal grants. Project financing will close in early 2002 and construction will begin in the second quarter.
Panda won't likely tap West Point's municipal water system but will drill a deep well for its water needs.
Panda Energy now is building the largest privately owned merchant power plant in the world a 2,700 megawatt facility in El Dorado, Ark. Beginning in 1998, Panda began development of a 1,000 megawatt plant that went online in June in Paris, Texas, where the company had to build five miles of water lines and 10 miles of gas lines in a $400 million project.
"During the time this thing was under construction, every hotel room in town was filled and every apartment was filled," said Gary Vest, executive director of the Paris Economic Development Corp. "We reaped all kinds of economic fallout during the construction because they had as many as 800 people working on this project and they hired a lot of local contractors. The major advantage (now) is just having a reliable power source, which also helps in attracting industry."
After completing the Paris project, Panda transferred ownership of all but 1 percent to Florida Power & Light, and a Baltimore energy provider buys 25 percent of the current production, examples of the fluid nature of the energy business.
"Panda owns a lot of their own power plants," Vest said, "but their fortŽ is building them and selling them and taking a profit."
Anderson said Panda plans to retain ownership of the West Point plant and continue operating it for the 30- to 40-year operational life of the facility. But the company can't guarantee its future ownership. In the Texas example, Panda Energy needed to raise additional capital to buy gas turbines for other plants.
The West Point project is substantially larger than a $350 million Saltillo power plant announced in August by GPU International. That plant will generate 750 megawatts.
The 1,300-megawatt facility in West Point will provide power sufficient for 1 million homes that will be transmitted throughout the Southeast.