EME Homer City Generation LP and General Electric Capital Corp. (GECC) have reached a deal for the coal-fired Homer City power plant to be transferred to GECC, EME Homer City said in a Sept. 24 SEC filing.
The parties entered into an implementation agreement on March 29 with respect to the Homer City plant. The agreement required EME Homer City to enter into one or more transactions at the request of GECC for the divestiture of EME Homer City’s leasehold interest in the Homer City plant and to assist GECC in obtaining certain third-party consents or waivers.
On Sept. 21, EME Homer City and Homer City Generation LP, an affiliate of GECC, entered into a master transaction agreement (MTA) for the divestiture by EME Homer City of its interest in the Homer City plant. Under the MTA, Homer City has agreed to transfer substantially all of its rights in and assets related to the Homer City plant, and specified liabilities, to Homer City Generation. Completion of the transaction is subject to a number of closing conditions, including obtaining the consent of more than two-thirds of the bonds issued under a 2001 indenture between Homer City Funding LLC and The Bank of New York, as successor trustee which consent may be provided through a plan of reorganization confirmed by any U.S. bankruptcy court.
Edison International (NYSE: EIX) raised the possibility in its July 31 quarterly Form 10-Q filing that its Edison Mission Energy (EME) independent power subsidiary may have to seek bankruptcy, mainly due to problems related to costs of coal-fired capacity in Illinois and Pennsylvania. The problem plant in Pennsylvania is Homer City, with EME Homer City an affiliate of Edison Mission Energy. Low regional power prices, plus the need to install expensive new air emissions controls at Homer City, were reasons cited for the financial problems.
The estimated cost of installing SO2 and particulate controls on Units 1 and 2 of the Homer City plant is expected to be $700m to $750m. On April 2, Homer City received the permit to construct such improvements from the state of Pennsylvania.
Homer City is a three-unit, 1,884-MW plant located in Indiana County, Pa. EME Homer City acquired the plant in March 1999 and completed a sale-leaseback of its facilities to third parties in December 2001.
Units 1 and 2 at the plant were placed into commercial operation in 1969, said EME Homer City’s March 28 annual Form 10-K report. Unit 1 has an installed capacity of 620 MW, and Unit 2 has an installed capacity of 614 MW. Unit 3 commenced commercial operation in 1977 and has an installed capacity of 650 MW.
The Homer City plant traditionally takes high-sulfur coal from nearby mines, with the scrubbed Unit 3 able to take coal of an even higher sulfur content. U.S. Energy Information Administration data shows that coal suppliers to the plant this year include Rosebud Mining, Unionvale Coal and Alpha Natural Resources (NYSE: ANR).