Associated Electric takes option to purchase New Madrid coal unit

The city of New Madrid, Mo., has approved an option for Associated Electric Cooperative to purchase the coal-fired New Madrid Unit 1 before termination of the existing agreement between the two parties expires in 2022, said Associated Electric on Aug. 20.

Associated Electric said it will make annual option payments to the city for the right to control the future of the generating unit, which includes decisions about capital improvements. The first payment of $25m by Associated Electric to the city is due Sept. 1. Payments totaling $100m over the term of the option agreement will be required in order for Associated to acquire the city’s interest in Unit 1.

The existing operating agreement between Associated and the city, which remains in effect, provides for Associated to operate the unit and deliver the city’s electricity at cost. The cooperative has rights to electricity it generates beyond the city’s needs. When Associated Electric exercises the purchase option, the city will be allowed to purchase power at the M&A Electric Power Cooperative wholesale rates. M&A is one of six owners of Associated Electric.

City Administrator John Gilbert said: “This is a win-win situation for both the city of New Madrid and Associated Electric. Associated Electric will be in a position to upgrade the New Madrid Plant ensuring its long-term presence in the community. The city of New Madrid will be able to invest in infrastructure improvements such as a new water plant, replacement of outdated water lines throughout the city, a new industrial park to attract more jobs, increased fire protection, community recreation center, and new structured utility rates to benefit residential customers and those on fixed incomes.”

Daryl Sorrell, general manager of M&A, said: “We have had a long and successful working relationship since New Madrid Power Plant was built in 1972. This option agreement will allow us some certainty in planning for the future long-term operation of New Madrid Unit 1, and it provides revenue the city needs for its services and projects.”

An Associated Electric fact book for 2013 shows that New Madrid Units 1 and 2 are each 600 MW in size, with each burning about 7,150 tons of coal per day. U.S. Energy Information Administration shows that the plant was taking its coal earlier this year from the North Antelope Rochelle mine of Peabody Energy (NYSE: BTU), which is located in the Wyoming end of the Powder River Basin.

Associated Electric is owned by and provides wholesale power to six regional and 51 local electric cooperative systems in Missouri, southeast Iowa and northeast Oklahoma that serve more than 875,000 customers.

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.