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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35387  
Subject: Re: AMEREN bonds now near double digit yields. Date: 3/23/2012 9:56 PM
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If you have seen the maps of coal fields in the US, it is difficult to imagine the politics of outlawing coal fired power plants in coal mining country. That includes southern IL, OH, PA, WV at least and probably more.

Clean coal is the watch word here. Ameren has participated from time to time but there have been some cost problems. High sulfur coal (and mercury) are one problem, which they have technology to address. Carbon dioxide sequestration is another concern, which remains to be demonstrated. And its the latter that relates to global warming.

Global warming seems to have lost some of its political support. Japan was going nuclear to resolve that problem. Now that is on hold. Most of Europe seems destined to go natural gas at least for now. And some might decide natural gas is clean enough for now.

Ameren has one nuclear plant and two major hydro projects (Bagnel Dam on Lake of the Ozarks and Keokuk on the Mississippi River), plus a water storage facility at Tom Sauk Mountain in Missouri that stores power at night by pumping water up hill and then generates power during peak demand hours in the daytime. We also have large numbers of unit trains supplying low sulfur western coal to power plants in this area. Some seem to supply Ameren plants.

Recall that shipping in low sulfur coal avoided scrubbers in the previous generation of power plants, and "debottlenecking" was a loophole that allowed expansion without scrubbers. That part is now changing causing old plants to shut down. But is anyone building new coal fired capacity? I doubt it. The shift will be to natural gas, but for Ameren, that could mean buying power rather than generating it.

Yes, they face some uncertain times while all these details get worked out, and perhaps wind and solar will become more attractive in coal country.

But this is mostly of concern for long bonds. Short term we will see lots of politics first.
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