Santee Cooper outsources FGD

20 July 2001

Under an innovative commercial arrangement, the flue gas desulphurisation system for Santee Cooper’s Wynah units 1 and 2, in South Carolina, will be built and owned by an outside company, based in Canada.

Toronto-based Marsulex has signed long-term agreements with Santee Cooper, South Carolina’s state-owned electric and water utility, under which it will build and own a $100 million flue gas desulphurisation (FGD) system at Santee Cooper’s Winyah site. The FGD, using Marsulex patented advanced sulphate scrubber technology, will treat the flue gas from units 1 and 2 of Santee Cooper’s Winyah power station, near Georgetown, South Carolina.

Marsulex will lease about 15 acres of land from Santee Cooper at the 2 600 acre Winyah facility. At its expense, Marsulex will construct and own two flue gas desulphurisation units, or “scrubbers”. Once Marsulex has met certain performance requirements, Santee Cooper will operate the scrubbers and related facilities. After 22 years, ownership of the pollution control equipment will transfer to Santee Cooper.

Marsulex’s sulphate FGD technology is designed to enable power generators to burn lower cost, high sulphur fuel (eg petroleum coke) while at the same time reducing overall SO2 emissions. The technology provides significant advantages over traditional flue gas scrubbing as it produces a high value fertiliser, granular ammonium sulphate, as the byproduct. Granular ammonium sulphate, says Marsulex, is valued for its nitrogen and sulphur content as well as its ease of blending with other plant nutrients and is typically used as a fertiliser for canola, wheat, rice and certain other acid-loving crops.

Traditional scrubbing produces sulphite sludge or gypsum as the byproduct, both of which can encounter potential disposal problems.

Outsourcing arrangement

Under the long-term arrangement, Marsulex will be paid a guaranteed service fee and will participate in income derived from fuel savings and the sale of ammonium sulphate. The guaranteed service fee will commence with successful start-up of the system, which is scheduled for January 2004.

EBITDA from the guaranteed service fee is expected to total in excess of US$200 million for Marsulex over the first 15 years of the arrangement. The agreements with Santee Cooper are subject to receipt of final permitting approval and finalising of certain commercial arrangements with third parties including financing. Financing for the system will be provided by Marsulex and third party debt on a non-recourse basis. A company in which Marsulex will invest approximately 20 per cent of the total costs to complete the construction, including soft costs, will own the system.

Applications for final permitting were due to be submitted to the regulatory authorities by Santee Cooper in summer 2001. Among the key points of the commercial agreement between Santee Cooper and Marsulex are:

• Santa Cooper is responsible for modifying infrastructure to handle the new fuel blend.

• Marsulex to design and own the flue gas system. Third party contractors will be used to construct the system under fixed price contracts.

• Santee Cooper to provide a long-term land lease as well as the necessary utilities (water, steam, gas, electric power) and manpower to operate and maintain the system.

• Marsulex to be responsible for the delivery of ammonia and the removal and sale of granular ammonium sulphate.

• Marsulex to provide overall system operating and maintenance supervision and technical support.

• Upon successful start-up of the system, Santee Cooper to pay Marsulex a guaranteed service fee on a monthly basis over the first 15 year life of the arrangement. In addition, the parties will share in the operating savings (fuel cost reduction and ammonium sulphate revenue) net of the system’s operating and maintenance costs.

Change of fuel

Winyah has a strong tradition in the FGD area, becoming the first station in the southeast to be equipped with scrubbers, in 1977. Santee Cooper also has a good track record: of the six scrubbed coal-fired units located at the 12 power plants in South Carolina, Santee Cooper owns and operates five (no units in North Carolina have scrubbers and only one unit in Georgia is scrubbed).

Winyah units 1 and 2 currently burn low sulphur coal with unit 2 partially scrubbed and Unit 1 unscrubbed. Once the FGD is installed the fuel blend will change to high sulphur coal and petroleum coke, which will reduce the cost of power production. The flue gas emissions will be fully scrubbed and will reduce SO2 emissions by up to 90 per cent compared with present SO2 emissions.

The process

Marsulex’s patented flue gas desulphurisation technology scrubs with ammonia to produce a high quality granular ammonium sulphate. The process chemistry can be summarised as:

SO2 + 2NH3 + H2O ‘ (NH4)2SO3

(NH4)SO3 + 1/2O2 ‘ (NH4)2SO4

Marsulex owns the patents to this technology and has commercially demonstrated the system at the Dakota Gasification Company facility since startup in June 1996. This facility is said by Marsulex to be the only large scale (350MW equivalent) commercially proven ammonia-scrubbing process producing high-grade granular ammonium sulphate in the world.

The future

Marsulex’s business model is built around its proprietary technologies, which are bundled with other Marsulex services such as byproduct management and removal, and offered on an outsourced basis.

The agreement with Santee Cooper is important, Marsulex believes, because “it signifies industry acceptance of both the business model and the technology.”

Marsulex expects the Santee Cooper facility to be only the first of a number of such facilities that will be built in North America and abroad. Discussions are well advanced with several other power generators, the company reports.

Winyah FGD project profile


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