The Blackstone Group, the New York-based buyout shop, will not develop a coal-fired power plant in Nevada, weighing that the political fallout, at a time when Congress is considering legislation that could significantly alter its business model, was not worth it.
For nearly seven years Blackstone’s portfolio company, Sithe Global, has been trying to develop the 750-megawatt Toquop energy project, eager to use cheap coal as a feedstock. And early on the company faced strong oppositions from local politicians and a coalition of environmentalists. In a move that’s likely to please them, yesterday, Blackstone said it would convert the project into a 700-megawatt natural gas-fired power plant with a 100 megawatts solar photovoltaic power plant.
Tony James, president of Blackstone, Majority Leader, Senator Harry Reid (D-Nev.) and local officials sat on the conference call announcing that Blackstone was dropping its coal power project.
A Sithe official could have easily sat in instead of James. But at a time when Congress is considering legislation that would increase the tax rate on carried interest, Blackstone is definitely in need of friends in high places. Carried interest are the profits buyout or private equity funds make on the returns from their investments. Typically, funds like Blackstone take a 20 percent share of any profit and this revenue stream is currently taxed at a low 15 percent capital gains rate. Some on Capitol Hill would like to tax it at a higher bracket, as normal income.
Obviously, Blackstone doesn’t want that to happen. Last week, James actually threw a party at his house in New York for Speaker Nancy Pelosi (D-Calif.), reports The Business Insider, citing the New York Post. The party, according to the Post, was meant to encourage Pelosi to vote against the potential tax hike on carried interest.
Outside of Nevada, Sithe is looking to develop coal-fired power plants in Pennsylvania and New Mexico. A source tells G.E.R. that the company has had a hard time securing regulatory approval to develop these two projects.
Last fall Sithe applied for $450 million in Department of Energy funding to implement carbon capture and storage technology at its coal-fired Desert Rock Energy project in New Mexico.
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