Fitch Ratings said in a Nov. 28 statement about the bond ratings for the Unified Government of Wyandotte County/Kansas City Board of Public Utilities (BPU) that BPU is planning to buy a piece of the gas-fired Dogwood power plant.
Bond proceeds will be used to purchase a 17% (110 MW) undivided interest in the natural-gas fired Dogwood facility ($70.3m) and to finance distribution system upgrades ($20m), Fitch noted.
BPU has implemented a multi-year rate increase plan, following a previous cost-of-service study. Fitch said that BPU has already implemented three rate increases since July 2010, and a final increase is planned for January 2013. Additional rate increases thereafter to cover future environmental related expenditures are likely.
“Sizable future capital additions are planned to improve and expand facilities and for environmental projects at BPU coal-fired plants,” Fitch added. “Costs for environmental modifications to the Nearman Station, BPU’s most important plant, range from $200 million to $300 million. Fitch believes that planned capex will require periodic rate increases beyond 2013 to preserve financial metrics at reasonable levels.”
BPU completed a comprehensive 20-year master plan in 2003. A re-evaluation in 2008 and 2009 led to decisions to discontinue planning for coal-fired plants and focus on gas generation. Preliminary results suggested adding a 25 MW-75 MW single-cycle combustion or combined cycle turbine, Fitch said. Dogwood was selected as the best option to meet capacity needs through at least 2016 and possibly as long as 2018.
The Dogwood facility, rated at 635 MW-650 MW, is a combined-cycle natural gas plant located southeast of Kansas City, Fitch noted. It was placed in commercial service in February 2002. “The facility has a strong operating history and will help position BPU for regulatory compliance, while enhancing fuel diversification (BPU is 90% coal based),” Fitch said. “BPU has been purchasing power from the plant since 2007.”
On Oct. 15, the Federal Energy Regulatory Commission approved part of this transaction. On Sept. 7, Dogwood Energy LLC filed an application with FERC requesting commission authorization to sell 17% of undivided interests in certain of its jurisdictional facilities to the Unified Government of Wyandotte County/Kansas City, Kansas. The jurisdictional facilities are limited interconnection transmission facilities, and book, records, and accounts associated with an approximately 614-MW natural gas-fired facility located near Pleasant Hill, Mo.
Dogwood is a public utility with authority to sell power at market-based rates. Dogwood is indirectly, wholly-owned by Kelson Holdings LLC, which, in turn, is owned two thirds by Harbinger Capital Partners Master Fund I Ltd. and one third by Harbinger Capital Partners Special Situations Fund LP. Dogwood currently leases 72.5% of the undivided interests in the facility. Dogwood will continue to own 55.5% of the undivided interests in the facility after this deal is done.
The Dogwood facility interconnects with the transmission system owned by KCP&L Greater Missouri Operations (KCPL-GMO) and is within the KCPL-GMO balancing authority area (BAA) of the Southwest Power Pool region.