Financial risks of the Gavin Coal Plant for institutional investors

The Gavin Coal Plant, owned by Lightstone Generation (a Blackstone and ArcLight Capital Partners joint venture), faces significant financial instability due to declining revenues in the PJM Interconnection market and high debt burdens. The plant is also subject to substantial EPA-mandated cleanup costs for coal ash contamination following a June 2024 court ruling. With the broader U.S. coal industry in decline and institutional investors divesting from thermal coal, the report urges pension funds to pressure owners to retire the plant responsibly to avoid the community and financial losses seen in other coal plant closures.

• The Gavin Coal Plant faces significant regulatory costs for coal ash cleanup after a June 2024 U.S. Court of Appeals ruling blocked attempts to evade these requirements. EPA estimates indicate the plant is responsible for $40 million in capital costs and $2.5 million annually to stop leachate dumping, plus another $7 million in capital costs and $500,000 annually to address bottom ash wastewater dumping.
• As a merchant power plant in the PJM Interconnection, Gavin's revenue is declining. Net generation reached its lowest level since 2001 in 2022, and capacity prices in the PJM market have dropped for three consecutive years, falling from $164.77 in the 2018/2019 delivery year to $28.92 MW-day for the 2024/2025 year. Capacity payments account for approximately 40-50% of Lightstone's cashflow.
• Lightstone Generation carries a high debt burden, with S&P estimating over $1 billion outstanding on its Term B loan at maturity in 2027. This follows a 2018 purchase of generators from AEP using $2.1 billion in debt financing and a subsequent $375 million dividend recapitalization.
• Private equity funds used to create Lightstone Generation have underperformed relative to benchmarks in Q1 2024. Blackstone Capital Partners VI (Blackstone VII) reported an IRR of 13% against a 17.25% benchmark, while ArcLight Energy Partners Fund VI (ArcLight VI) reported an IRR of 3.18% against a 10% benchmark.
• The U.S. coal industry is in systemic decline, with IEEFA research indicating half of peak coal-fired generation in the US will close by 2026. In the PJM market, coal's share of generation fell from 44% in 2013 to 14% in 2023.
• Institutional investors and lawmakers are divesting from coal to mitigate climate-related financial risks. Examples include the New York City Employees’ Retirement System, the New York State Teachers’ Retirement System, the New York State Pension Fund, and the Oregon Public Employees Retirement System, the latter of which is directed by the COAL Act to divest about $1 billion in coal mining and energy companies.

APA

Private Equity Stakeholder Project (2024). Financial risks of the Gavin Coal Plant for institutional investors. https://pestakeholder.org/news/financial-risks-of-the-gavin-coal-plant-for-institutional-investors/

Chicago

Private Equity Stakeholder Project. Financial risks of the Gavin Coal Plant for institutional investors. 2024. https://pestakeholder.org/news/financial-risks-of-the-gavin-coal-plant-for-institutional-investors/.

Wikipedia

{{cite report |author=Private Equity Stakeholder Project |title=Financial risks of the Gavin Coal Plant for institutional investors |date=22 July 2024 |url=https://pestakeholder.org/news/financial-risks-of-the-gavin-coal-plant-for-institutional-investors/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{privateequitystakeholderproject2024financial, author = {{Private Equity Stakeholder Project}}, title = {{Financial risks of the Gavin Coal Plant for institutional investors}}, institution = {Private Equity Stakeholder Project}, year = {2024}, month = jul, url = {https://pestakeholder.org/news/financial-risks-of-the-gavin-coal-plant-for-institutional-investors/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }