UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
January 18, 2005 (January 11, 2005)
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Date of Report (Date of earliest event reported)
AES Eastern Energy, L.P.
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(Exact name of registrant as specified in charter)
Delaware 333-89725 54-1920088
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4300 Wilson Boulevard, Arlington, Va. 22203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 522-1315
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communication pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
INFORMATION TO BE INCLUDED IN THE REPORT
Item 8.01 Other Events.
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Three subisidiaries of AES Eastern Energy, L.P. ("we" or "us"), AEE2, L.L.C.,
AES Greenidge, L.L.C. and AES Westover, L.L.C., two subsidiaries of AES Creative
Resources, L.P. ("ACR"), an indirect wholly owned subsidiary of The AES
Corporation that we do not control, AES Hickling, L.L.C., and AES Jennison,
L.L.C. (our subsidiaries named above and ACR's subsidiaries named above are
referred to collectively as the "AES Entities") and New York State Electric &
Gas Corporation ("NYSEG") entered into a Consent Decree dated January 11, 2005
with the New York Attorney General, on behalf of the State of New York, and the
Commissioner of the New York State Department of Environmental Conservation
("NYSDEC") to settle all civil claims that were or could have been brought by
the State against the AES Entities and NYSEG for alleged violations of the
Prevention of Significant Deterioration ("PSD")or non-attainment New Source
Review ("NSR") provisions of the federal Clean Air Act, federal New Source
Performance Standards applicable to the generating stations, similar State
pre-construction air permitting requirements under the applicable NYSDEC
regulations, common law claims, including public nuisance law, and claims under
New York State Executive Law involving the following units: Greenidge Units 3
and 4, Westover Units 7 and 8, Hickling Units 1 and 2, and Jennison Units 1 and
2. The Consent Decree was filed with the United States District Court for the
Western District of New York on January 12, 2005. The Consent Decree is expected
to be entered by the Court after completion of a public comment period and a
separate 45 day period in which the Federal Government may submit comments. The
Federal Government also has the opportunity to intervene in the case. The
Consent Decree will become effective when it is entered by the Court.
Background
On May 14, 1999, wholly owned subsidiaries of ours and ACR's acquired from NYSEG
and its affiliate NGE Generation, Inc. six coal-fired electricity generating
stations and related assets. One of our wholly owned subsidiaries, AEE2, L.L.C.,
(which wholly owns AES Greenidge, L.L.C. and AES Westover, L.L.C.) acquired two
of the six coal-fired electricity generating stations, the Greenidge Generating
Station ("Greenidge") and the Westover Generating Station ("Westover").
Subsidiaries of ACR acquired two other older, coal-fired electricity generating
stations from NYSEG in the transaction, the Jennison Generating Station
("Jennison") and the Hickling Generating Station ("Hickling").
We received an information request letter dated October 12, 1999 from the New
York Attorney General, which sought detailed operating and maintenance history
for the Westover and Greenidge plants. On January 13, 2000, we received a
subpoena from the NYSDEC seeking similar operating and maintenance history from
the Westover, Greenidge, Jennison, and Hickling plants. This information was
sought in connection with the Attorney General's and the NYSDEC's investigations
of several electricity generating stations in New York that they suspected of
undertaking modifications in
the past without undergoing an air permitting review. By letter dated May 25,
2000, the NYSDEC issued a Notice of Violation ("NOV") to NYSEG for violations of
the Clean Air Act and the New York Environmental Conservation Law at the
Greenidge and Westover plants related to NYSEG's alleged failure to undergo an
air permitting review for repairs and improvements made during the 1980s and
1990s, which was prior to the acquisition of the six plants by our subsidiaries
and ACR. Pursuant to the purchase agreement relating to the acquisition of the
six coal-fired plants from NYSEG, we agreed to assume responsibility for most of
the environmental liabilities that arose while NYSEG owned the plants. On
September 12, 2000, we acknowledged that we would assume the defense of and
responsibility for the NOV issued to NYSEG, subject to a reservation of our
rights to assert applicable exceptions to our contractual undertaking to assume
preexisting environmental liabilities.
Terms of the Consent Decree
Under the terms and conditions of the Consent Decree, upon entering into effect,
the State of New York covenants not to sue and releases the AES Entities and
NYSEG from alleged violations under the above-mentioned air emission laws and
regulations and also covenants not to sue or bring any administrative
enforcement actions against the AES Entities for claims under the
above-mentioned air emission laws and regulations associated with work required
pursuant to the Consent Decree or other changes at the plants commenced after
entry of the Consent Decree, but prior to December 31, 2009 and completed by
December 31, 2010. Under the Consent Decree, the AES Entities have agreed to pay
a $700,000 civil penalty for the violations assessed to NYSEG and will deposit
$1,000,000 in an AES Environmental Mitigation Project Account that will be used
to carry out one or more projects pertaining to energy efficiency, renewable
energy and/or clean air projects that are approved by the NYSDEC and the Office
of the Attorney General.
The Consent Decree sets forth mandated emission reductions and requires the
installation of new emission control technologies on certain units or the
repowering of or the ceasing of operations of such units. On Greenidge Unit 4,
we are obligated to control sulfur dioxide ("SO2") and nitrogen oxide ("NOx")
emissions through a multi-pollutant control clean coal project ("MCP Project").
This obligation is subject to the partial funding of the MCP Project by the U.S.
Department of Energy and the absence of any force majeure event or material
adverse change in circumstances that affects the economic viability of the MCP
Project. The MCP Project involves the use of a single bed in-duct Selective
Catalytic Reduction system combined with a low-NOx combustion technology to
reduce NOx and a Circulating Dry Scrubber that will reduce SO2. We are required
to commence initial operation of the MCP Project by September 1, 2006 or a date
eighteen months after entry of the Consent Decree, whichever is later. We are
also obligated to use good faith efforts to meet a NOx emission rate of 0.10
lb/mmBtu and achieve a SO2 removal efficiency of 95% during normal operations on
Greenidge Unit 4. If the MCP Project on Greenidge Unit 4 is discontinued, we are
required by December 31, 2009 either to (i) install control technology that will
meet the Consent Decree emission limits, (ii) repower with a non-coal fuel
source or (iii) cease operations.
On Westover Unit 8, we are obligated under the Consent Decree to take one of the
following three actions by December 31, 2009 and to notify the NYSDEC of which
action we elect to take by June 1, 2007: (i) control NOx
and SO2 using technology similar to the MCP Project on Greenidge Unit 4, (ii)
repower with a non-coal fuel source or (iii) cease operations. Beginning in 2005
and lasting through 2009, Westover Unit 8 is subject to a declining SO2
emissions cap that starts with a cap in 2005 and declines by 250 tons per year
until 2009. Should we elect to install emission control technology on Westover
Unit 8 by December 31, 2009, then we are obligated under the Consent Decree to
use good faith efforts to meet a NOx emissions rate of 0.10 lbs/mmBtu and a SO2
removal efficiency of 95%.
Under the Consent Decree, Greenidge Unit 3 and Westover Unit 7 are required
either to (i) install control technology equivalent to Best Available Control
Technology or BACT, (ii) be repowered with a non-coal fuel, or (iii) cease
operations, no later than December 31, 2009. During the years 2007, 2008, and
2009, these two units will be subject to an annual operating limit of 1,400
hours with an SO2 emission rate of 3.0 lb/mmBtu. Hickling Units 1 and 2 and
Jennison Units 1 and 2 are each required either to (i) install BACT-equivalent
control technology, (ii) repower using a non-coal fuel or (iii) cease operations
no later than May 1, 2007. The Consent Decree does allow us to use up to a 30%
blend of sub-bituminous (reduced sulfur) coal at either the Greenidge or
Westover plants.
The Consent Decree also requires the surrender of federal Acid Rain Program SO2
allowances for Greenidge Units 3 and 4 and Westover Units 7 and 8 starting in
the year 2012. The amount of allowances that will be surrendered depends on
which compliance option we ultimately select for these units.
In the event that we fail to comply with one or more terms of the Consent
Decree, we are obligated to pay stipulated penalties that are set forth in the
settlement with the exception of noncompliance due to force majeure events or
certain material adverse conditions affecting the economic viability of the MCP
Project. Upon achieving compliance with the material requirements of the Consent
Decree, then the parties to the settlement may petition the court for
termination of the Consent Decree. We expect that the emission reduction and
control technology requirements set forth in the Consent Decree will be
incorporated into each plant's Title V air operating permit.
We have projected that our share of the capital costs to install the MCP Project
at Greenidge Unit 4 will be approximately $29 million, however, there can be no
assurance that this will be the actual cost since we have not entered into an
agreement for engineering, construction and procurement of the MCP Project at
Greenidge Unit 4. At this time, we have not made decisions regarding the options
of either installing pollution control technology, repowering or ceasing
operations at the other units subject to the terms of the Consent Decree, and
thus we are unable to project the potential costs associated with complying with
the other provisions of the Consent Decree on our financial condition or the
effect on future operations.
The United States Environmental Protection Agency ("EPA") is not a signatory to
the Consent Decree, and it is possible that EPA could separately issue us a NOV
for alleged violations of the federal Clean Air Act and federally enforceable
New York air regulations associated with suspected past modifications of plant
equipment without undergoing an air permitting review. If EPA does file an
enforcement action against Greenidge, Westover, Hickling or Jennison, then
penalties may be asserted
and further emission reductions might be necessary which could require us to
make substantial expenditures. We are unable to estimate the effect of any
EPA-issued NOV on our financial condition or results of future operations.
The Consent Decree does not affect our two newest and largest electricity
generating stations, Somerset and Cayuga.
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Current Report to be signed on its
behalf by the undersigned thereunto duly authorized.
AES EASTERN ENERGY, L.P.
By: AES NY, L.L.C., as General Partner
By: /s/ Daniel J. Rothaupt
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Daniel J. Rothaupt
President
Date: January 18, 2005 (principal executive officer)