FERC signs off on sale of Midland Cogeneration Venture gas plant

The Federal Energy Regulatory Commission on Nov. 30 signed-off on the sale of the gas-fired Midland Cogeneration Venture power plant in Michigan.

On Oct. 16, Midland Cogeneration Venture LP (MCV) and Sparta Acquisition Corp. had submitted an application with FERC requesting authorization for the sale by Fortistar Midland LLC, Fortistar Midland 2 LLC, Fortistar Midland Services LLC and MYA Investments Sp. z.o.o. of the ownership interests in MCV to Sparta. According to the applicants, the jurisdictional facilities associated with the transaction consist of MCV’s market-based rate tariff, wholesale power sale agreements, and related books and records.

Applicants said that MCV is a cogeneration QF that is exempt from commission regulation under Federal Power Act section 203 and, therefore, that prior commission approval is not needed for the transaction. Applicants nevertheless said they were making the application out of an abundance of caution and asked the commission to approve the transaction. “This order approves the Transaction without making any determination of jurisdiction,” said the Nov. 30 FERC order.

MCV is the owner and operator of an approximately 1,647 MW natural gas-fired cogeneration facility located in Midland, Mich. The facility is interconnected to the Michigan Electric Transmission Co. transmission system, located in the Midwest Independent Transmission System Operator (MISO) market. Applicants stated that 1,240 MW and 150 MW of the facility’s capacity are committed, respectively, to Consumers Energy and Dow Chemical under long-term power purchase agreements (PPAs). The rest of the plant’s capacity is sold on the market.

Both the plant buyer and seller have complicated ownership structures

As to MCV’s pre-transaction upstream ownership, Chippewa Acquisition Co. LLC owns 100% of MCV’s limited partnership interests and MCV GP Acquisition Co. LLC (MCV GP) owns 100% of MCV’s general partnership interests. Applicant told FERC that Chippewa and MCV GP are wholly owned by Midland Acquisition Co., which, in turn, is wholly owned by Midland Acquisition Co. LLC (Midland Acquisition). Midland Acquisition is owned 97.772% by MCV Holding Co. LLC (MCV Holding) and 2.228% by three board members and four management members. MCV Holding is owned 70.287% by Progress Place Acquisition Co. Inc. (Progress Place), 4.713% by Fortistar Midland, 25% by Fortistar Midland 2, and through a Value Unit held by Fortistar Midland Services.

The Fortistar Sub Sellers are each wholly owned subsidiaries of Fortistar LLC. Applicants stated that Fortistar is an investor in the power industry and owns about 60 power projects in the U.S., all of which are QFs, under the Public Utility Regulatory Policies Act of 1978, or exempt wholesale generators (EWGs), under the Public Utility Holding Company Act of 2005.

Applicants stated that the EQT Sub Seller is a Polish limited liability company, acting through its Luxembourg branch, a registered branch of MYA Investments Sp. z.o.o., and it is ultimately owned by EQT Infrastructure Ltd. Applicants stated that Progress Place, a domestic corporation, is owned 100% by the EQT Sub Seller and was incorporated in January 2009 to effectuate the acquisition of MCV through a joint venture with Fortistar.

Sparta is a subsidiary of OMERS Administration Corp. (OMERS), which was formed to acquire the interests in MCV. Applicants stated that OMERS administers one of Canada’s pension funds and that OMERS is limited in the amount of voting rights that it can hold and establishes trusts to hold a portion of the voting rights in these investments, including The Hamilton Infrastructure Trust (Hamilton Trust).

Applicants stated that OMERS, through subsidiaries BPC Penco II Corp. (Penco II) and BPC Power Corp., owns 100% of the non-voting, participating shares and 20% of the voting, non-participating shares of Sparta. Applicants stated that the remaining 80% of the voting, non-participating shares of Sparta are held by Hamilton Infrastructure Holdings, Inc. (HIHI) through its wholly owned subsidiary, Borealis Power Generation Holdings Inc. In addition, applicants told FERC that Hamilton Trust owns 70% of the voting interests in HIHI and OMERS own the remaining 30% of the voting interests in HIHI.

OMERS affiliates have stakes in Ontario nuclear power plants

The applicants told FERC that BPC Generation Infrastructure Trust (BPC Trust), a trust formed by OMERS, holds a 33.3% participating and a 29.9% voting interest in Bruce Power Inc. (Bruce Power) and a 50% participating and a 29.6% voting interest in Bruce Power A Inc. (Bruce A). Bruce Power, a Canadian corporation, operates as a power marketer in Canada and is authorized to sell energy and capacity at market-based rates in the United States.

Bruce Power is the general partner of Bruce Power LP (BPLP), with a less than 1% general partner interest. BPC Trust holds a 31.6% limited partnership interest in BPLP and 48.9% limited partnership interest in Bruce Power A LP (BALP). BPLP leases the Bruce A and Bruce B nuclear plants, which are owned by Ontario Power Generation and are controlled by Bruce Power, as the licensed operator. BPLP subleases the Bruce A nuclear plant to BALP, and the Bruce A plant’s net electrical output of approximately 3,000 MW is committed under a long-term power supply agreement with the Ontario Power Authority.

The Bruce B nuclear plant produces a net output of about 3,300 MW, and while Bruce Power is authorized to export electricity from Canada into the United States, Bruce Power can export power from Ontario, Canada, only by purchasing power at the border through the Ontario Independent Electricity System Operator. Applicants said that as a result, Bruce Power has no ability to sell the output of the Bruce B nuclear plant to purchasers located in the U.S., and, thus, it has no unique ability to control exports from Ontario.

Under the Purchase and Sale Agreement, Sparta will acquire 100% of the indirect ownership interests in MCV. Applicants stated that after the consummation of the transaction, Sparta will directly own 53.142% of MCV Holding and the remaining 46.858% of the direct interests in MCV Holding will be owned by Progress Place, which will be a wholly owned subsidiary of Sparta.

Work ongoing to add another 640 MW of capacity at MCV

EQT Infrastructure and Fortistar had announced Oct. 2 that they had signed a definitive agreement to sell Midland Cogeneration Venture to Toronto-based Borealis Infrastructure. Borealis invests in and manages infrastructure assets on behalf of OMERS, one of Canada’s largest pension funds. EQT Infrastructure and Fortistar acquired 70% and 30% respectively in MCV in May of 2009. They noted that MCV has begun development and permitting work for a 640 MW expansion of the facility, which would enable it to expand its electricity and steam service to existing customers and potentially provide these services to additional customers.

“MCV has enhanced its ability to provide reliable electricity and steam to its customers and the local community for many years to come. The focused operational improvement strategy has substantially exceeded the original expectations which we attribute to the extraordinary commitment of the MCV employees to implement this strategy. EQT Infrastructure and Fortistar are divesting a company which is more reliable, more energy efficient and better positioned for its future than when it was acquired,” said Glen Matsumoto, Partner at EQT Partners Inc., Investment Advisor to EQT Infrastructure.

“During the ownership by EQT Infrastructure and Fortistar, MCV has been through a transformation that only few could have imagined back in May 2009. I am very proud that the operational performance of the plant has increased significantly while employee safety has further improved. The employees of MCV are excited about continuing their commitment to operational excellence under the ownership of Borealis,” said Roger Kelley, CEO of MCV.

“MCV is an excellent facility with a strong management team, and it is exactly the type of large-scale infrastructure asset we look for to help us generate consistent, long-term returns,” said Michael Rolland, Borealis President and CEO. “Our teams in both Toronto and New York look forward to working with the MCV management team and building on the success that they have been able to achieve over the past few years.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.