April 2 (Bloomberg) -- Dynegy Inc., branded the ``king'' of coal-fired power plants by the National Environmental Trust, said electricity buyers, not producers, are dictating the fuel types of new generators.

Environmental groups oppose Dynegy's coal-fueled plants under development in Texas, Arkansas and Georgia as out of step with efforts to cut emissions of so-called greenhouse gases linked to global warming. The Sierra Club organized a protest in February outside Dynegy's headquarters in Houston.

``They want to focus on the coal,'' Dynegy Chief Executive Officer Bruce Williamson said yesterday in an interview in Houston. ``They should focus a little bit on the fact that the toughest thing with a gas development or any renewable development is finding customers that want that development.''

Less polluting generation, such as turbines that run on natural gas or wind, are more expensive than coal. Dynegy, which also has wind and solar power projects, can only build plants that will yield a return on investment, Williamson and Chief Financial Officer Holli Nichols said in the interview.

``We won't build something unless there's customers that want to buy the output, and it's not going to be anything that moves forward unless regulators and communities have their say and it gets the approvals,'' Williamson said.

Williamson was nominated for an award called Fossil Fool of the Year, given by groups including the Energy Action Coalition, Co-op America and Rainforest Action Network to recognize the biggest contributor to fossil-fuel-related pollution. He finished fifth in the voting.

Photo Ops

Williamson said some environmental opponents are more interested in photo opportunities than in constructive dialogue.

The goal of the campaign against Dynegy is to demonstrate opposition to the company's coal-fueled developments, said Emily Stone, a Houston field organizer with the Sierra Club. She said costs for cleaner power sources will drop if investment is made to expand their use.

``But what it really takes to make that a reality is big companies like Dynegy putting their money where it matters and making the right decisions with their investments,'' Stone said.

Dynegy's coal-fired projects currently under construction include a 665-megawatt development in Arkansas known as Plum Point and a 900-megawatt plant in Texas called Sandy Creek. The company, which has power stations in 12 U.S. states, also wants to build a 1,200-megawatt plant in Georgia.

Slow Process

Environmental opposition is making it more time-consuming to build coal-fueled plants, Williamson said. He said that's making it tougher to align the elements of a project that have to come together at the same time: prices, financing, approvals and construction costs, which are escalating.

``I wouldn't be at all surprised to see a lull in new plant development,'' Williamson said.

With the U.S. already headed toward a shortage of generation capacity, that will mean higher power prices and an increase in the value of existing plants, Williamson said.

Just as many of the municipalities and other customers that buy power from Dynegy don't want to take on the cost of the cleanest generation sources, Williamson said, consumers may not be able to pay for limits on U.S. carbon-dioxide emissions. Imposing a fee of $30 or $40 a ton on carbon emissions would result in sticker shock for utility customers, he said.

Carbon Cost

``I don't think the American consumer can take a 30 or 40 percent increase in their power bill,'' Williamson said.

U.S. political leaders must provide direction to balance the country's needs to have affordable energy, protect the environment and reduce reliance on energy imports, Williamson said. ``We need politicians who are going to be leaders in Washington,'' he said.

Williamson joined Dynegy in 2002 and averted bankruptcy by selling assets and unwinding a failed energy-trading business. After posting losses in four of the previous five years, Dynegy netted $264 million in 2007.

The acquisition last year of plants from LS Power Group reduced Dynegy's reliance on coal-fueled power plants in the U.S. Midwest for profit. About 22 percent of the company's generation capacity is fueled by coal. Most of the rest is gas.

Dynegy has said it may use excess cash for new plants, acquisitions, share buybacks or the resumption of dividends. The company gave itself liquidity and flexibility with its financial turnaround, Williamson said, and decisions on use of extra cash will likely be put off until at least late this year.

Debt Maturities

Refinancing was done in 2007 -- before this year's decline in credit availability -- leaving the company with no major debt maturities before 2011, Williamson said.

Power plants have sold recently for more than 100 percent of replacement cost, Williamson said. Dynegy's stock price values its plants at only 55 to 60 percent of the cost of replacing them, he said. The company won't make acquisitions at a higher price relative to replacement cost than its own assets are trading, he said.

Dynegy, which is developing new plants through a joint venture with LS, has the capacity to produce almost 19,000 megawatts, enough power for more than 15 million average U.S. homes, based on an Energy Department estimate.

To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net.

Last Updated: April 2, 2008 11:27 EDT