South Mississippi Electric Power Association (SMEPA) said Aug. 23 that it is making two major purchases involving both natural gas- and coal-fired power, adding over 900 MW of capacity to its system.
SMEPA said it plans to purchase both the 837-MW Batesville natural gas power station from LSP Energy via a bankruptcy proceeding and is also buying a 15% interest in a 582-MW lignite coal gasification power plant that Mississippi Power, a Southern (NYSE: SO) subsidiary, is building in Kemper County, Miss.
The purchase of the Batesville facility will include all assets of the natural gas plant located in Batesville, Miss., including three 279-MW combined-cycle units (837 MW total), the site’s 58-acre land parcel and plant support facilities, including pipelines, transmission lines and an interconnection switchyard. The facility is interconnected with the transmission systems of Entergy Mississippi and the Tennessee Valley Authority (TVA). The purchase price will be about $340 per KW.
SMEPA has said it wants to go from being a renter to an owner at the Batesville power plant where it already has exclusive rights to the capacity and energy from Batesville’s Unit 3 through a long-term power purchase agreement signed in 1998, which was set to expire in 2015.
SMEPA’s estimated $286m purchase still awaits approval by the U.S. Bankruptcy Court in Delaware. The bankruptcy judge’s approval could come Sept. 20, the company said. The Batesville deal also needs the blessing of FERC and the Rural Utilities Service.
Current Batesville owner LSP Energy filed for Chapter 11 bankruptcy in February 2012, but maintains possession and management of the property until the sale is complete.
“SMEPA currently has a combination of owned generation and contracts with others to purchase generation capacity,” said SMEPA General Manager and CEO Jim Compton. “At the direction of our board, we are pursuing opportunities to move from contracts to owned resources where such a transaction will help improve reliability and reduce costs to serve our members. Buying Batesville fit that goal as we already have a contract for the capacity from one of the units and also because the purchase price was well below the cost to build a new plant.”
Ratcliffe IGCC expected online in 2014
The purchase of a 15% share of Mississippi Power’s Ratcliffe IGCC plant will add 88.5 MW of low-cost energy with a long-term, stable fuel supply to the SME generation mix once the plant begins commercial operation in May 2014, SMEPA said.
The integrated gasification combined cycle power plant will use lignite coal produced from a neighboring mine as a long-term fuel supply. Byproducts from the electric generation process will be sold for beneficial use in other industries, providing additional environmental and economic benefits, SMEPA said.
“Plant Ratcliffe has a high capital cost but will have a very low energy cost,” Compton said. “Because SMEPA currently purchases 28% of its energy needs from Mississippi Power Company, our wholesale rates will be impacted regardless of our participation in the project. However, our analysis shows that ownership by SMEPA of a portion of the facility is the best overall option for our customers.”
The proposed sale is also contingent upon loan approval by the RUS, which is expected by the end of September, and an approval by the Mississippi Public Service Commission. SMEPA’s ownership in the facility is expected to close by the end of the year.
SMEPA CEO Compton said the power association is taking advantage of low interest rates to increase the generation capacity that it directly owns while decreasing fleet emissions.
“We are continuing our transition from traditional generation resources to more efficient, more environmentally-friendly resources,” said Compton. “The Moselle Repower Project was the first step, along with environmental control upgrades at Plant Morrow. This month we have entered into an agreement for ownership of the Batesville combined-cycle facility, and our board has given final approval for the purchase of the Kemper IGCC facility. All together, the investment in the Moselle, Morrow, Batesville, and Kemper projects total approximately $1.1 billion, and represent a very significant investment on behalf of the 410,000 ultimate customers we serve.”
South Mississippi Electric is a not-for-profit cooperative that generates, transmits and sells wholesale electric energy to 11 member distribution cooperatives.