Canada-based Emera Inc. (TSX: EMA) has entered into an agreement to purchase three combined-cycle gas-fired generating facilities in New England from Capital Power Corp. (TSX:CPX).
The transaction will add 1,050 MW to Emera’s generation capacity in the northeast, and represents a total investment of US$541m, said Emera in an Aug. 28 statement. The facilities, all of which are of recent vintage, are Bridgeport Energy (520 MW) in Bridgeport, Conn.; Tiverton Power (265 MW) in Tiverton, R.I.; and Rumford Power (265 MW) in Rumford, Maine.
”These are quality assets, in a region Emera knows very well, having operated in the New England gas and electricity markets for more than a decade,” said Chris Huskilson, President and CEO of Emera. “Adding gas generation to our existing generation portfolio of wind and hydro assets in the northeast has been a strategic objective for Emera. We are pleased to have acquired these particular assets, which are highly efficient, well situated, and low emitting, and which we believe can deliver value to our business.”
Emera said it plans to finance the purchase with cash and short term credit resources on closing; and ultimately expects to finance the acquisition with a combination of debt and equity consistent with maintaining its strong financial position and existing credit ratings. The deal is subject to regulatory approvals and is expected to close by the end of 2013.
“Emera is making this investment for the long term,” said Huskilson. “The earnings profile is modest in the early years, but we have acquired these facilities at a fair price and we expect their value will increase over time, as we optimize within our portfolio, as older, less efficient assets in the region are retired, and more intermittent renewable generation is added to the system.”
Capital Power said that Bridgeport Energy has been operational since 1999, Tiverton Power has been operational since 2000, and Rumford Power has been operational since 2000.
“The transaction is consistent with our focus on enhancing Capital Power’s returns for shareholders while rebalancing risk in our portfolio,” said Capital Power President and CEO Brian Vaasjo in an Aug. 28 statement. “The sale proceeds for the New England assets will be redeployed to reduce our merchant risk profile and provide more predictable earnings and cash flow.”
Capital Power to focus in the future on Alberta operations
Capital Power’s merchant power activities will now be focused on Alberta in Canada. The company will continue to pursue growth in contracted power generation across North America.
“Focusing Capital Power’s business is the best way to create immediate and long-term value for shareholders and balance the Company’s merchant and contracted portfolio,” said Vaasjo. “While we will continue to pursue contracted power generation opportunities throughout North America, growth in our merchant power business and our trading activities will now be focused on North America’s strongest power market, Alberta. … For example, we expect the Shepard Energy Centre to deliver improved returns for shareholders, and provide a combination of contracted and merchant cash flow that reduces Capital Power’s portfolio risk and earnings volatility.”
Capital Power said it will wind down its commodity and energy trading business outside Alberta before year end, closing its Toronto office immediately and its Chicago office in 2014. Energy trading and portfolio management activities will continue within Alberta. Focused teams in Alberta, Boston and San Diego will continue to pursue growth, seeking contracted development and acquisition opportunities across North America, and both merchant and contracted opportunities within Alberta.
“The Alberta merchant focus has significant implications for the organization,” said Bryan DeNeve, Capital Power’s Senior Vice President Corporate Development & Commercial Services. “Our employee base and operating complexity is significantly reduced by the divestiture of the northeast U.S. plants, and resources will no longer be required to support power or gas trading in U.S. markets or the pursuit of merchant growth opportunities outside Alberta.”
Following the close of the New England transaction, Capital Power will own more than 2,500 MW of generation capacity at 13 facilities, and an additional 371 MW of capacity through power purchase agreements (PPAs). An additional 595 MW of owned capacity is under construction or in advanced development in Alberta and Ontario.
Emera invests in electricity generation, transmission and distribution, as well as gas transmission and utility energy services. Emera’s strategy is focused on the transformation of the electricity industry to cleaner generation and the delivery of that clean energy to market. Emera has investments throughout Northeastern North America, and in three Caribbean countries. More than 80% of the company’s earnings come from regulated investments, including Canadian utility Nova Scotia Power.