The Top 10 Business Stories of 2009

by Arkansas Business Staff  on Monday, Dec. 28, 2009 12:00 am  

No. 6
Rough Year for Energy Industry

As if a $10.6 million repair bill and $18 million in lost revenue after an epic ice storm weren't headache enough, Southwestern Electric Power Co. also had to make the case for massive rate hikes in 2009 while fighting environmental challenges to the $2.1 billion coal-burning power plant the company is building in southwest Arkansas.

Hanging in the balance were 110 permanent jobs and an annual $3.9 million in school and county property taxes, not to mention the 600-megawatt capacity of the John W. Turk Jr. plant in Hempstead County west of Hope.

Opposition to that plant - spearheaded by the Audubon Society and the Sierra Club - apparently fed public backlash when Swepco petitioned regulators to allow a $53.9 million rate increase. Hundreds wrote letters objecting to the rate increase, which in November was permitted at a lower $17.8 million base rate increase and $11 million for a Shreveport natural gas plant.

Meanwhile, Swepco beat back challenges to the Turk plant that concerned air permits, potential violations of the Clear Air Act and the power lines that would connect the plant to the power grid.

For now, the plant is rolling ahead. It could face another hurdle before operating if the Environmental Protection Agency mandates that the plant practice carbon capture - its current plan doesn't include plans for carbon capture, only land available to do so - but it's on track to be operational by 2013, slightly behind its original schedule.

The problem with pushing for cheap, abundant energy is that energy can become too cheap and too abundant. Since Arkansas' natural gas operations began to gain momentum in the mid-2000s, there had been no sweeter phrase to many Arkansans than "Fayetteville Shale," the geological formation that promised thousands of landowners steady royalty income, if not a fortune.

This year, though, the hills of north Arkansas are providing less cash. Speculation and new discovery pushed wellhead natural gas prices to a seven-year low, off 68 percent between June 2008 and June 2009. Another byproduct: Disappointing revenue from the state severance tax, which in 2009 was tied for the first time to the value of the gas produced.

No. 7
Affiliated Foods Bankruptcy

Affiliated Foods Southwest Inc. of Little Rock, one of Arkansas' largest private companies, filed for Chapter 11 bankruptcy protection in May and quickly began laying off workers and selling assets. 

The wholesale food distribution company reported debts of $101.5 million and assets of $47.6 million. The company couldn't escape Chapter 11 reorganization, and its bankruptcy was converted in August to a Chapter 7 liquidation.

For the fiscal year that ended June 30, 2007, Affiliated had $763.2 million in revenue and a net income of $4 million. A year later, revenue had fallen to $730 million and its net income was $3.8 million.

 

 

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