The Illinois Pollution Control Board opted to reject a transfer of delay rights on emissions improvements from coal-fired plants seller Ameren to potential owner Dynegy.

However, the two confirmed the obstacle would not stop the sale progressing.

In a decision from the agency dated June 6, the IPCB denied the motion to transfer delay rights. Instead it ordered Dynegy to prove the extra time is justified. It also said that variances from its officials must demonstrate financial hardship.

While Ameren had argued in its prior filings that the transfer to the plants’ owners was “a mandatory condition to closing the transaction”, the board said that Illinois Power Holdings – a subsidiary Dynergy formed for the transaction – would be free to file a new and separate variance petition.

Rejection aside, Ameren officials said both parties were committed to completing the deal and the variance would be resubmitted.

“Both IPH and AER will pursue such relief before the board, and are confident that the board will ultimately grant IPH and AER's requests,” the officials said.

“The companies anticipate such a filing will be made in the near future.”

Texas-based Dynegy, fresh out of bankruptcy protection in October, confirmed in March that it planned to double its generation capacity in Illinois with the purchase of five of Ameren’s coal-fired power facilities.

The deal, as it stands, will involve no cash because Ameren will spend about $133 million to buy back three natural gas-fueled plants from the subsidiary Dynegy is divesting.

Under the deal, Dynegy will get $825 million in non-recourse debt as well as Ameren’s retail and marketing assets in Illinois.

Including the Ameren plants, the Houston company will have more than 8000 megawatts of generating capacity in Illinois and about 14,000MW across the US.

“We expect that this transaction will reduce business risk and improve the predictability of our future earnings and cash flows, which is expected to strengthen Ameren’s credit profile and support Ameren’s dividend,” Ameren chairman and chief executive officer Thomas Voss said when the deal was announced.

The transaction will also be Ameren’s official exit from the merchant generation business, making good on a December announcement that it would sell off its unit to focus on regulated operations in Illinois as well as Missouri.

A fully copy of the IPCB’s decision is available at http://www.ipcb.state.il.us/documents/dsweb/Get/Document-80364.