Before closing the book on 2013, Missouri Business Alert is taking a look back at the year’s most important stories in Missouri business, focusing on the top 10 stories overall and the top five in several key industries:
The abnormally cold winter of 2013 in Missouri drove gains for electric utilities, including the parent company of Kansas City Power & Light, Great Plains Energy. Natural gas companies also reaped the benefits of the cold, since many utility companies switched from coal to natural gas in 2012. Coal companies worked to make a comeback by using the Super Bowl blackout as a marketing opportunity, and Peabody Energy Corp. revenues plummeted in the first quarter as coal sales slowed.
Stocks of Missouri-based Peabody and other leading coal companies took initial hits in the fall after the Environmental Protection Agency issued its draft regulations outlining limits on carbon emissions from new power plants.
Meanwhile, renewable energy made significant gains. Missouri S&T looked toward geothermal to help cut energy usage by half, Ameren received the green light to continue its Pure Power green energy pricing program, and a wind project in western Kansas is expected to create 5,000 construction jobs in 2016.
There was turnover in the major energy players as well in 2013. The chairman of the Missouri Public Service Commission, Kevin Gunn, resigned, and Robert S. Kenney was named chairman by Gov. Jay Nixon in March.
However, it was acquisitions, solar power and ethanol that were the dominant headlines throughout the year.
Here are the top energy stories of 2013:
1. Laclede Gas acquires Missouri Gas Energy
The Laclede Group closed the $1.o4 billion purchase of two Southern Union Co.’s divisions in 2013, and later in the year closed the purchase of Missouri Gas Energy and New England Gas Co., which effectively doubled Laclede’s customer base to nearly 1.2 million. The St. Louis-based company, now the largest natural gas distribution company in Missouri, estimated the merger would reduce annual nonfuel operating and maintenance expenses by between $25 and $34 million dollars.
After the acquisition, Missouri Gas Energy sought a rate increase that would cost the average residential customer an extra $2.33 a month and increase revenue by $17 million. Laclede’s CEO, Suzanne Sitherwood, received a 13 percent raise, and Steven Rasche became the CFO of Laclede.
2. Patriot clashes with union, emerges from bankruptcy
After filing for bankruptcy on July 9, 2012, the St. Louis-based Patriot Coal Corp. opened 2013 with a federal hearing over its bankruptcy — five years after spinning off from Peabody Energy Corp. The miners union, and eventually Patriot itself, questioned the motives behind the spinoff. Patriot said the spinoff allowed Peabody to “rid itself of $600 million of retiree health care liabilities along with hundreds of millions of dollars of other obligations,” the St. Louis Post-Dispatch reported.
Benefits for miners and retirees became central to the bankruptcy proceeding and in January, Patriot said it had “unsustainable labor-related legacy liabilities.” Many miners and retirees gathered for protests in St. Louis because of concerns that their health care and pension benefits could be taken during the Chapter 11 proceedings.
In March, Patriot asked a judge for permission to pay 110 managers retention bonuses totaling $6.9 million, and a federal judge approved a request to modify agreements with the miners union, which could have affected 23,000 retired miners and their families.
As the company wrangled with its cash flow, which would run dry in early 2014, it continued to look at union wages and retiree benefits as places to cut. At the end of May, a federal judge denied a request that Peabody pay health care benefits for certain retirees. But a federal appeals court overturned the decision in August and left Peabody responsible for approximately 3,100 retirees’ health care benefits.
After Barclays and Deutsche Bank financed up to $576 million and the company presented a restructuring plan, Patriot exited bankruptcy Dec. 18.
3. Inergy bought for $7 billion
In May, the Kansas City-based gas pipeline operator Inergy announced that it planned to merge with Crestwood Midstream Partners as part of a $7 billion deal. Shareholders approved the plan to merge with the Houston-based company Oct. 7. After the merger, the company began operating under the name Crestwood Midstream Partners. The company kept about 125 employees in its Kansas City office, but Robert Phillips, Crestwood’s chairman and chief executive, took charge of the new company. John Sherman, Inergy’s chairman and CEO, and Brooks Sherman, president of Inergy, stepped down from daily management duties but maintained investments in the partnership. Crestwood plans to invest $1.2 billion over the next four years to increase its business in various energy plays.
4. Ethanol industry dealt regulatory challenges
The 2008 Missouri Renewable Fuel Standard Act made E10, or fuel with 10 percent ethanol, the standard fuel in Missouri, putting it on par with the rest of the country. Ethanol companies looked to expand by pushing for the sale of E15, which has a higher percentage of ethanol, in Missouri. Although the Missouri Department of Agriculture voted to allow the sale of E15, the Joint Committee on Administrative Rules voted to prohibit the agriculture department from making the change.
Meanwhile, at the national level, the Environmental Protection Agency proposed a reduction of almost 3 billion gallons in the mandated amount of biofuels to be blended into the nation’s fuel supply in 2014, casting further doubt on the ethanol industry in Missouri and nationwide.
5. Solar grows as rebate program proves popular
Missouri residents and companies took advantage of the state’s solar energy rebates, pushing the program to its limits. The growth followed the passage in 2008 of Proposition C, which required that 2 percent of public utilities’ energy to come from solar in Missouri.
Some companies, including Kansas City Power and Light, received enough applications to exceed their solar rebate limits. The program was so popular that Ameren Missouri raised concerns in October that rates would increase by more than 1 percent, thus breaking state law, as the rebate requests reached $35.5 million. However, the Missouri Public Commission challenged Ameren’s calculation. Eventually an agreement was reached that Ameren would pay out $92 million in solar rebates.
The business has stretched as well: employment among members of the Missouri Solar Industry Association increased from 150 in 2011 to 350 in 2013. After earning nearly $42 million, almost double its expected revenue, St. Louis-based Microgrid Solar decided to open four more offices nationally.
On the other side of the state, Brightergy LLC formed a partnership with Black & Veatch to develop $100 million in solar projects with the next three years. Meanwhile, City Utilities in Springfield is looking to build Missouri’s largest solar farm.