PNM seeks approval from FERC for Delta Person power plant deal

Public Service Co. of New Mexico, Delta Person LP, Delta Person GP LLC (DPGP) and BHB Power LLC (BHB) on Jan. 24 sought Federal Energy Regulatory Commission approval for a transaction in which PNM will purchase from the other companies 100% of the membership interests in Delta Person and its gas-fired power plant in New Mexico.

PNM would then subsequently dissolve Delta Person and take direct ownership of Delta Person’s jurisdictional facilities. Delta Person owns and operates a natural gas-fired generating facility with a capacity of approximately 132 MW located near Albuquerque, N.M. Under a Power Purchase Agreement with Delta Person, PNM already is entitled to purchase 100% of the capacity and energy produced by the Delta Facility on a long-term basis.

PNM, a subsidiary of PNM Resources (NYSE: PNM), announced Dec. 11, 2012, that it had signed a purchase and sale agreement for this plant.

Following completion of the transaction, PNM will add the Delta Facility to its fleet of generating facilities for use in serving its customers. “The Transaction will not have any adverse effect on competition, rates or regulation, and will not cause cross-subsidization of a non-utility associate company or any pledge or encumbrance of utility assets for the benefit of an associate company,” said the application filed with FERC. “The Transaction is consistent with the public interest and FERC should approve it.”

The applicants requested prompt consideration, with a notice period of 21 days, and issuance of an order within 60 days.

Delta Person is owned 99.99% by BHB, as a limited partner, and 0.01% by DPGP, as a general partner. Delta Person is a single purpose entity that owns and operates as its sole business activity the Delta facility. Delta Person is an exempt wholesale generator (EWG) and has market-based rate authority for the PPA with PNM.

The Delta facility is a dual-fuel GE 7FA combustion turbine generating facility capable of using either its primary fuel, natural gas, or fuel oil as fuel, with a generating capacity of approximately 132 MW. The facilities and equipment of the Delta facility also include generator interconnection facilities, control systems, emissions control systems and other appurtenant facilities and equipment. The Delta facility was placed into service in July 2000.

BHB and DPGP are both wholly-owned by Delta Person LLC (DPLLC). In turn, DPLLC is owned by the following entities: DPC Person LLC (6%), John Hancock Life Insurance Co. (U.S.A.) (34%), John Hancock Partnership Holdings I LP (3%), John Hancock Partnership Holdings II LP (3%), Epsilon Power Funding LLC (40%) and AL Person LLC (14%).

Said PNM about the plant in a Jan. 3 application for a transaction approval from the New Mexico Public Regulation Commission: “Due to the Delta Plant’s location within the Northern New Mexico load center, the Delta Plant is a critical PNM load-side resource for generation, to relieve transmission system constraints and to provide voltage support to PNM’s transmission system. The Delta Plant can be started in 30 minutes using either natural gas or fuel oil. The Delta Plant also has a quick start capability of providing 21.5 MW in ten (10) minutes, consistent with the reserve requirements of the Southwest Reserve Sharing Group. Further, the Delta Plant can be used for load following and to balance generation to load when load and intermittent resource generation fluctuates.”

Under the purchase agreement, PNM has agreed to acquire the Delta partnership for a total cost of $40.7m. The $40.7m purchase price is composed of $23m for the equity investment and the assumption of the outstanding Delta partnership debt of $17.7m (assuming a June 30, 2013, closing of the purchase transaction). An independent appraisal report prepared for PNM has assessed the market value of the Delta plant at approximately $45.9m.

A final approval order entered by the New Mexico commission on or before May 31, 2013, will meet the needs of sellers and will allow PNM’s customers to realize the benefits of PNM owning and operating the Delta plant rather than continuing under the existing Delta PPA, the utility told the commission.

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.