EIF to acquire full control of Northampton coal plant in Pa.

Northampton Generating Co. LP, the operator of a waste-coal-fired power plant in Pennsylvania, on Dec. 28 requested Federal Energy Regulatory Commission authorization for the disposition of jurisdictional facilities that will result from a restructuring of the equity ownership interests in the company under a Chapter 11 plan of reorganization.

That reorganization is being pursued at the U.S. Bankruptcy Court for the Western District of North Carolina. Following the restructuring, United States Power Fund III LP (USPF III) and one or more of USPF III’s affiliates under common management and control with USPF III (together, the EIF Funds) will indirectly own 100% of the partnership interests in Northampton. The EIF Funds currently hold 77.5% of the indirect partnership interests in Northampton and therefore are already affiliated with it.

Cogentrix Energy LLC, which currently holds the remaining 22.5% of the indirect partnership interests in Northampton, will no longer own any equity interest in Northampton following the restructuring.

“As demonstrated herein, the Restructuring will not have any adverse effect on competition, rates, or regulation and will not result in any cross-subsidization concerns,” the application said. “Accordingly, the Restructuring is consistent with the public interest and should be authorized by the Commission pursuant to FPA section 203.”

The parties intend to close the restructuring as soon as possible after obtaining bankruptcy court approval for it, which is expected to occur in February 2013. Accordingly, the company requested expedited FERC action on this application, by Jan. 28.

Northampton is a small plant mostly fired by waste coal

Northampton owns and operates an approximately 134 MW (nameplate) small power production facility located in Northampton, Pa. The facility is interconnected to the transmission system owned by PPL and operated by PJM Interconnection (PJM). It is a qualifying facility (QF) under the Public Utility Regulatory Policies Act of 1978, as amended (PURPA). Northampton also is an exempt wholesale generator (EWG) under the Public Utility Holding Company Act of 2005 (PUHCA). The commission has authorized Northampton to sell energy, capacity, and ancillary services at market-based rates.

Northampton currently is owned by CGX/Northampton LLC (f/k/a Cogentrix/Northampton LLC) (CGX/Northampton) (50% general partnership interest) and Jaeger II LLC (Jaeger II) (50% limited partnership interest). CGX/Northampton and Jaeger II are wholly-owned direct subsidiaries of Northampton Holdco LLC, which is owned by Cogentrix (22.5%) and EIF Calypso LLC (EIF Calypso) (77.5%). Cogentrix is a wholly-owned indirect subsidiary of The Goldman Sachs Group Inc. EIF Calypso is wholly-owned by the EIF Funds.

In addition to Northampton, EIF is affiliated with various other entities that own or control generation in the PJM balancing authority area (BAA), including:

  • Chambers Cogeneration LP, the owner of a 285-MW QF located in Carneys Point, N.J.;
  • Logan Generating Co. LP, the lessee and operator of a 242.3-MW QF located in Logan Township, N.J.;
  • Edgecombe Genco LLC, the owner of a 135-MW QF located in Rocky Mount, N.C.;
  • Spruance Genco LLC, the owner of a two-unit 270-MW QF located in Richmond, Va.;
  • Morgantown Energy Associates, the owner of a 68.91-MW QF located in Morgantown, W.Va.;
  • Scrubgrass Generating Co. LP, the owner of a 94.7-MW QF located in Kennerdale, Pa.; and
  • RC Cape May Holdings LLC, the owner of the 475.6-MW B.L. England station located in Cape May County, N.J.

Outside of the PJM BAA, EIF is affiliated with approximately 1,884 MW in the Northeast region. Therefore, EIF is affiliated with a total of 3,624.7 MW in the Northeast region (including the Northampton Facility).

EIF to acquire full control of the plant

Subject to the approval of the bankruptcy court and the commission, the equity ownership interests in Northampton will be restructured pursuant to the plan of reorganization. Specifically, the existing equity interests in Northampton will be canceled and Northampton will issue new general partnership interests to EIF Northampton GP LLC (EIF Northampton GP) (50%) and new limited partnership interests to EIF Northampton LP LLC (EIF Northampton LP) (50%). EIF Northampton GP and EIF Northampton LP will be wholly-owned direct subsidiaries of EIF Northampton LLC, which is wholly-owned directly and indirectly by the EIF Funds.

Northampton sells all of the electrical output of its facility at wholesale under its market-based rate authorization. The restructuring will not affect Northampton’s wholesale power sales rates, which will continue to be market-driven, the company noted.

The Northampton facility is fueled by a blend of waste products including, but not limited to, anthracite waste coal, tire-derived fuels and residual fiber waste.

A disclosure statement filed with the bankruptcy court, which was attached to the FERC application, said: “The Debtor’s financial performance in the years preceding the [December 2011] Petition Date was hampered by a combination of rising fuel costs and burdensome terms contained in both the [power purchase agreement] PPA and the [Transmission Service Agreement] TSA. At the time the petition was filed, fuel costs were up over 40 percent since 2005 due primarily to increases in the cost to transport fuel needed to operate the Facility as well as a decrease in fuel quality and certain other fuel production changes. The terms of the Debtor’s PPA did not allow the Debtor to recoup these increases in fuel costs through its power sales to [Metropolitan Edison] Met-Ed, which negatively impacted the Debtor’s ability to service its debt.”

It added: “Even more concerning to the Debtor was the future pricing schedule of power sales in the PPA. First, the terms of the PPA dictated that, from 2011 through its termination in 2020, payment to the Debtor for baseload power (i.e., power delivered up to 718,320 MWh) would be significantly lower on a per MWh basis than prior to 2010. The significance of this is that baseload power constituted the majority of power that the Debtor delivered pursuant to the PPA. Assuming constant generation from year-to-year, this drop would have caused a decline of over 30 percent in revenues on a run-rate basis. Second, the terms of the PPA provided for even lower rates for excess power (i.e., power delivered above 718,320 MWh) delivered to Met-Ed as compared to rates paid for baseload power, thereby removing any potential the Debtor may have had to increase cash flow from delivery of power in excess of baseload amounts. It is also important to note that the rates paid under the PPA were, in most cases, well below rates the Debtor could have achieved had it sold power into the PJM Market on a merchant basis at then current rates. While future revenues were uncertain, forward power models suggested that, at the time of the Petition Date, revenues may have been nearly $10 million higher over 2012 and 2013 versus revenues that were expected to be collected under the PPA.”

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.