Lincoln Electric System has agreed to pay $10.5 million to dump its 30 percent stake in the coal-fired Sheldon Station power plant near Hallam.
Despite the hefty price tag, the Lincoln utility will break even in two years and save money in the long run, Chief Executive Officer Kevin Wailes said.
Oversight boards for both LES and the Nebraska Public Power District, which owns the power station, voted unanimously on Thursday to end the relationship.
LES signed a contract in the early 1980s for the life of the power plant, giving it rights to 30 percent of its 225 megawatts of electric output, but it also came with a responsibility for 30 percent of costs. LES expected to make about $3 million off the plant this year yet spend $12 million in costs, LES Vice President of Power Supply Jason Fortik said.
Dropping Sheldon Station will not affect LES rates and the capacity will not need to be replaced.
Wailes said several factors led to the decision, including that LES currently has more capacity than it needs, forecasts for Lincoln's electrical needs are nearly flat and market conditions have changed significantly in the past decade.
“Over the past couple years, we’ve sold excess capacity on the short-term markets to recover some of the funds it takes to maintain that kind of capacity on the system,” Wailes said.
LES board member W. Don Nelson noted the idea of dissolving the Sheldon agreement has been kicked around at least since he got on the board eight years ago.
LES’s General Counsel, Shelley Sahling-Zart, said the departure from the agreement with NPPD was amicable.
The move does not affect any other agreements LES has with NPPD.
NPPD in 2015 penned an agreement with Monolith Materials Inc., which is building a plant next to Sheldon to produce a fine powder called carbon black that gets used in products like inks, tires and plastics.
Monolith plans to sell hydrogen, a byproduct of its process, to NPPD which will convert one of the two boilers at Sheldon to run on the fuel, which produces nearly zero greenhouse gas emissions.
Monolith has agreed to pay a significant portion of the cost to convert the boiler and the contract is considered proprietary. NPPD spokesman Mark Becker said costs for the conversion, expected to be done in 2019, have yet to be determined.