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Buffalo banker building power plants miles away

Building power plants and generating electricity are a far cry from banking and money management, but to an experienced entrepreneur like Andrew Dorn, it’s still all about starting and investing in a new business.

Never mind that the site of the new business is 275 miles and two states away.

Dorn – a veteran Western New York banker who founded two local banks in the past 20 years – is a core part of a Buffalo-based venture that is seeking to build a new natural gas-fired power plant amid the hills of West Virginia’s panhandle.

Together with his sons, Drew and Matthew, their Dorn Energy LLC firm is one of two managing partners in Moundsville Power LLC, which last month received approval from the West Virginia Public Service Commission to build a 549-megawatt “combined-cycle” plant in Moundsville, about 13 miles south of Wheeling.

Powered by both natural gas and ethane from West Virginia producers and processors, the $615 million plant is expected to be the largest user of natural gas in that state and the first power plant in the country to burn ethane. And it will be capitalizing on its prime location in the middle of the Marcellus and Utica shale formations, with easy access to low-cost fuel from numerous providers.

“It’s an ideal location for a power plant,” Dorn said. “It’s got everything you need.”

The plant will be built on 37.2 acres along the Ohio River at a former Allied Chemical Corp. chlorine factory site that has been inactive for 20 years.

The site is within seven miles of three interstate pipelines and across the street from an electricity transmission substation. And it’s right off a state highway near Interstate 70, with both railroad access to the property and nearby barge docks on the river, making it “a perfect location for heavy-haul equipment,” Dorn said. The river also provides an easy source for obtaining and discharging water.

But it took three years and a group of Western New Yorkers to bring it together and earn the support of not only West Virginia’s leadership but also the local community.

Banking background

Dorn’s son, Drew, is president of the venture and a trained ceramic engineer who has worked extensively in the electricity and gas industry. His other son, Matthew, an accountant, is the chief financial officer. Dorn, as chairman, brings years of experience dealing with a highly regulated industry, and handles the governmental and community relations aspect.

“They needed somebody with gray hair,” he joked, adding, “This is as regulated as banks are. I’ve been used to dealing with regulators my whole life, so there’s a lot of similarities there.”

Dorn worked at major banks locally before setting out on his own to help start Jamestown Savings Bank in 1995 and then Greater Buffalo Savings Bank in late 1999, after selling Jamestown to Northwest Bancshares.

Greater Buffalo grew quickly, opening 16 branches, amassing nearly $1 billion in assets and adding customers throughout the metro area, and it even obtained a listing on the New York Stock Exchange through a reverse merger. But with economic storm-clouds developing, Dorn sold the bank to First Niagara Financial Group in 2007 for $153 million in cash and stock.

Since then, he helped run a private wealth office in Buffalo for a Canadian family, handling their fixed-income investments, but that venture shut down more than two years ago when low interest rates made it difficult to find any suitable investments.

The Dorns have teamed up with Jon Williams, the owner of Ontario Specialty Contracting, as well as Christopher O’Donnell, the general partner of Rochester-based venture capital firm Trillium Group. Williams, whose firm does large-scale demolition and environmental remediation projects in North and South America, is the other managing partner in the Moundsville project.

Finding the site

So how did Dorn and a group of Western New Yorkers wind up trying to build a power plant in West Virginia?

It was Drew Dorn, the group’s energy expert, and Williams who brought the partners and property together. Williams’ Ontario Specialty has done significant remediation and demolition work for manufacturer Honeywell International, which merged with Allied Signal Corp. in 2000. Allied had owned the Moundsville plant.

Through that relationship, Williams had the right-of-first-refusal to redevelop any of the former Honeywell properties. He and the Dorns teamed up to consider options for various sites, and soon identified the potential need for more power generation.

Moundsville was an ideal site, Dorn said. The land had been largely cleaned up, and the portion that they purchased was actually the former picnic grounds and baseball diamonds for the Allied factory, so it wasn’t as polluted to begin with. Another company, a midstream processor, bought the rest of the land for a factory to take liquids out of natural gas.

“It’s all about location and being in the right place at the right time,” Dorn said. “And it’s a terrific reuse of this old industrial site, so the community is thrilled with it.”

No opposition spoke

However, the new plant may still have its critics among environmentalists. The state’s air quality permit, issued last November, will allow the plant to emit more than 2.2 million tons of greenhouse gases per year and 11.9 tons of “hazardous” air pollutants. And the plant will discharge treated water into the river.

“Retiring our nation’s coal plants doesn’t have to mean an increase in natural gas,” said Jackson Morris, director of Eastern energy at the Natural Resources Defense Council. “Smarter, cheaper and cleaner solutions are readily available and becoming more competitive than ever.”

But that hasn’t sparked public opposition to the Moundsville plant. Dorn said the chair of the Public Service Commission told them no one had spoken out at a public hearing or written a letter against the project, which received 444 letters and resolutions in support, and was backed by West Virginia’s governor. The project also received a $31 million payment-in-lieu-of-taxes benefit from Marshall County, where it is located.

“We were the first applicant for a major project in the state in his memory that had no one oppose the project,” Dorn said. “West Virginia has a long history of people coming in and exporting natural gas and timber and other resources, so they’re thrilled to see natural gas being used in West Virginia.”

Selling power

Timing was also everything. First, the proximity to shale gas producers and a glut of ethane separated from the natural gas in the ground meant they were able to negotiate for a “very cheap, long-term supply” of both fuels. Second, new federal clean-air regulations related to mercury and carbon dioxide are forcing the shutdown of a lot of older, coal-fired plants in coal country states like Pennsylvania, Kentucky and West Virginia because it’s too expensive to upgrade them to meet the new emission standards.

That includes one plant three miles to the north of Moundsville that closed three years ago, and one just to the south that will close later this year, plus three others within a larger region.

“There’s a big need for generation,” Dorn said. “So it was the right site, at the right time.”

The new plant is being designed as a non-regulated “merchant generator” that will sell its power directly into the regional electricity grid operated by PJM Interconnection, which serves 13 Mid-Atlantic and Midwestern states. New York is not part of PJM, but West Virginia is.

At 549 megawatts, it would burn about $105 million of natural gas and ethane annually, and would generate enough electricity to power 325,000 homes. The wholesale power will not be sold directly to any customers, but since the fuel is locally sourced, West Virginia residents would continue to receive a 20 percent royalty from the use of their resources, Dorn said.

“Power generation is a very dynamic rapidly changing industry that is the backbone of industrial development and our economy,” Dorn said. “But the most enjoyment I get is the opportunity to work with my sons everyday.”

Looking for more

With the state approvals and air permits now in hand, construction is slated to start later this year, with the plant operational by June 2018. Dorn and O’Donnell are finalizing the financing, using KeyCorp’s investment banking unit KeyBanc Capital Markets to draw equity and debt support.

The project will create 500 construction jobs over 30 months, and 30 permanent but high-paying jobs to operate the plant, which will pay $1 million in taxes to support Marshall County’s $10 million budget and 35,000 residents.

And despite the amount of time and effort it took, Dorn said the team isn’t done. The group, whose umbrella firm is Energy Solutions Consortium LLC, is already exploring additional options, both in West Virginia and other states.

“It’s a great project,” he said. “We’ve learned a lot, and we’re starting to work on some other plant sites now.”