TransAlta Corp. (TSX: TA) (NYSE: TAC) said June 18 that CalEnergy LLC, a joint venture with MidAmerican Energy Holdings, had executed an 86-MW long-term contract for renewable geothermal power with the City of Riverside, Calif.
Under the power purchase agreement, which runs from 2016 to 2039, CalEnergy will provide the power from a portfolio of geothermal facilities in California’s Imperial Valley.
“Securing long-term contracts and growing our renewable portfolio within our core markets is a key focus of our business strategy,” said Dawn Farrell, TransAlta President and CEO. “This contract will extend the life of the geothermal facilities and create long term value for our shareholders.”
The 24-year power purchase agreement builds on an existing relationship with the City of Riverside and represents 25% of the total capacity of the Imperial Valley geothermal facilities. CalEnergy is marketing the remainder of the capacity from the 10 geothermal facilities as the existing contracts roll off.
On May 17, MidAmerican Energy Holdings and TransAlta announced the formation of CalEnergy, a new special purpose entity that will allow the marketing of reliable green power in a new way. The 340-MW contract capacity available for this remarketing initiative is one of the largest single geothermal remarketing exercises to be pursued in North America, which will extend the operating life of all 10 facilities in the Imperial Valley region of California for another 25 years.
“CalEnergy has developed an exciting strategy for marketing the output of these facilities,” said Bill Fehrman, president of MidAmerican Renewables, in the May 17 announcement. “The formation of CalEnergy, LLC ensures our existing facilities in the Salton Sea field remain in our renewable energy portfolio for years to come.”
Program focused on life extension for these longstanding facilities
MidAmerican Renewables oversees MidAmerican Geothermal, which is based in Imperial Valley, Calif., and owns and operates 10 geothermal facilities with TransAlta. Over the next three to seven years, eight of 10 geothermal facilities operated by CalEnergy Operating Corp. in the Known Salton Sea Geothermal Resource Area field will reach their original design life of 30 years.
The owners, 50-50 partners that are indirect subsidiaries of MidAmerican Energy Holdings and TransAlta, have developed CalEnergy, which is in discussions with a number of California and Arizona-based utilities interested in contracting for the energy output of the facilities. The majority of the geothermal facilities have been in operation for more than 20 years and have been under long-term power purchase agreements since their initial construction.
New capital improvement plans will sustain the facilities for more than 25 years, the companies said. A new contract structure has been adopted that will market the existing plants as a portfolio, or fleet of plants, rather than as individual plants. The re-contracting effort and infusion of capital will help maintain operations that currently employ a staff of more than 200 and continue to provide the largest source of tax revenues for Imperial County, Calif.
“TransAlta’s continued investment in the Imperial Valley geothermal resource and plants reaffirms our commitment to a strategy based on a diversified fuel mix that also includes gas, wind, hydro and coal across three key markets,” said Paul Taylor, president of TransAlta USA. “The decision to extend the life of these facilities and the innovative remarketing effort is an important step in meeting the ongoing renewable energy needs of California and neighboring states.”
TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the U.S. and Australia. Its U.S. assets include the Centralia coal-firedplant in Washington state.
MidAmerican Energy Holdings, based in Des Moines, Iowa, is a global provider of energy services. Through its energy-related businesses, MidAmerican provides electric and natural gas service to more than 7 million customers worldwide.
MidAmerican Renewables owns and operates wind, geothermal, solar and hydro projects in the unregulated renewables market. MidAmerican Geothermal, a subsidiary of MidAmerican Renewables, is a Calipatria, Calif.-based geothermal power producer.