Project: Dynegy, a Houston-based wholesale power provider, wished to evaluate its options in the adaptive reuse of its 600 MW Morro Bay power plant and associated holdings in the City of Morro Bay in San Luis Obispo County, CA.
Challenge: to model alternative outcomes before entering into binding agreements to sell, hold, or redevelop the property.
Solution: We developed alternate development models assuming continued operation of gas-fired power plant but under following conditions:
1. Uncertain operation horizon while Dynegy in negotiations with the city of Morro Bay to extend an outfall lease
2. Current site could be redeveloped with new air cooled gas peaker units to supplement renewable generation fluctuations
3. Removal of tank farms, remediation of site to industrial standards and redevelopment to HBU or as allowed by zoning
4. Adaptive re-use of site for renewable energy power generation or component manufacture
5. Compatibility and potential impact of tenancy by institutional-educational entity
6. Impact on value of phased redevelopment where power plant continues operations for stipulated term
7. Generate component property values under alternate scenarios
Result: Presentation to local Dynegy Board; project held up during bankruptcy negotiations.
Lead Consultant: P. Barton DeLacy, MAI, CRE, FRICS, Director – National Energy Practice, Valuation and Advisory Services