Texas commission nears decision on NRG buy of Gregory plant

The Public Utility Commission of Texas on May 30 posted a proposed order to approve an NRG Energy (NYSE: NRG) buy of the 387-MW, gas-fired Gregory power plant.

The April 9 application for this approval, which came from NRG Texas Gregory LLC, covers the acquisition all of the general and limited partnership interests of Gregory Power Partners LP (GPP) from Javelin Gregory General Corp., Gregory Holding #1 LLC, KY Energy Power Gregory #1 Inc., and KY Energy LLC. NRG has requested that the application be placed on the commission’s June 20 meeting agenda.

GPP owns an approximately 387-MW (summer net dependable) natural gas-fired cogeneration facility located in Gregory, Texas, in the ERCOT power region. NRG proposed to close the transaction on Aug. 8, or as soon as possible upon commission approval of the proposed purchase.

Following the close of this deal, NRG states that the combined direct- and indirectly-owned generation of NRG within ERCOT will be 11,473 MW, based on the summer net dependable capability rating of all generation capacity owned and controlled by NRG and its affiliates that is currently connected, or is scheduled to be connected within the next 12 months, with a transmission or distribution system within ERCOT, except for wind resources which are discounted to 8.7% of installed nameplate capacity as per the methodology currently utilized in ERCOT’s Capacity, Demand and Reserves Report.

NRG said that the combined, direct and indirectly owned generation of NRG within ERCOT will exceed 1% of the total electricity offered for sale in ERCOT, but that NRG will only own about 13.7% of the total generating capacity within the ERCOT region, well below the 20% threshold that could trigger additional review of the proposed purchase under the Public Utility Regulatory Act.

NRG Energy, in announcing this deal on April 8, said it is with a consortium of affiliates of Atlantic Power Corp., John Hancock Life Insurance Co. (U.S.A.), and Rockland Capital LLC. The cogeneration plant is equivalent to an about 560-MW combined-cycle gas turbine plant with generation capacity of approximately 400-MW (nominal) and steam capacity of more than a million pounds per hour (160 MW of electricity equivalent).

NRG would pay approximately $244m for the plant. Counting both electrical generation and steam production, this cost equates to approximately $436 per kilowatt.

“The addition of what is, in effect, a six heat rate, fast start, gas-fueled plant at a significant discount to replacement cost is an invaluable addition to our Texas fleet, particularly at this time with market rules and supply conditions inTexas placing a premium on flexible operations,” said David Crane, President and Chief Executive Officer of NRG.

The Gregory plant provides steam, processed water and a small percentage of its electrical generation to the Corpus Christi Sherwin Alumina plant. The majority of the baseload generation is available for sale in ERCOT. This adds greater NRG capacity in ERCOT’s south zone, where NRG currently serves significant retail load and looks to continue to expand its customer base in this growing part of the state. The Gregory cogeneration unit came online in 2000.

“The Gregory plant’s long-term steam contract and additional generation in a zone where NRG sees significant growth potential complements our wholesale and retail positions in the State exceptionally well,” said John Ragan, president of NRG’s Gulf Coast region. “Adding Gregory to NRG’s existing portfolio of cogeneration and combined cycle plants also increases our ability to share expertise and best practices across Texas and the nation.”

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.