Affiliates of utility holding companies ALLETE (NYSE: ALE) and AES Corp. (NYSE: AES) filed Nov. 15 for approval at the Federal Energy Regulatory Commission for the acquisition of three wind generating assets by ALLETE from AES.
ALLETE Clean Energy, a subsidiary of ALLETE, had publicly announced on Nov. 11 that it had signed an acquisition agreement to purchase these wind farms in Minnesota, Iowa and Oregon from AES, with the deal to close in early 2014.
Condon Wind Power LLC, Lake Benton Power Partners LLC, Storm Lake Power Partners II LLC and ALLETE Clean Energy (ACE) requested authorization for the acquisition by ACE West Holdings LLC, a wholly-owned subsidiary of ACE, of 100% of the Class B membership interests in Condon and in AES Mid-West Holdings LLC (AES Mid-West), the indirect owner of 100% of the membership interests in Lake Benton and Storm Lake.
ACE is a wholly-owned subsidiary of Minnesota Power Enterprises, which is a subsidiary of ALLETE, the owner of regulated utility Minnesota Power. ACE’s principal place of business is in Duluth, Minn. ACE was formed for the purpose of, among other things, owning or developing renewable projects throughout North America. ACE does not currently own or control jurisdictional assets or engage in any Federal Power Act (FPA) jurisdictional activities.
The acquiror in the transaction, ACE West, is a wholly-owned subsidiary of ACE, and an indirect subsidiary of ALLETE. ACE West was formed for purposes of the transaction and does not currently own any energy assets.
AES Mid-West indirectly owns 100% of the membership interests in Lake Benton and Storm Lake through intermediate subsidiaries. AES Corp. through its indirect subsidiary, AES Mid-West Wind LLC, owns all of the active Class B membership interests in AES Mid-West. The remaining passive Class A membership interests in AES Mid-West are owned by an unaffiliated tax equity investor.
- Lake Benton is a public utility under the FPA and an exempt wholesale generator (EWG) that owns and operates a 106-MW wind facility in the Midcontinent ISO balancing authority area (BAA). All of the power produced by the Lake Benton Facility is fully committed to Northern States Power, a unit of Xcel Energy (NYSE: XEL), under a long-term contract which expires in 2028.
- Storm Lake is a public utility under the FPA and an EWG that owns and operates a 78-MW wind facility located in the MISO BAA. All of the power produced by this facility is fully committed to Interstate Power and Light, a unit of Alliant Energy (NYSE: LNT), under two long-term contracts that expire in 2019 and 2032.
- Condon is a public utility having market-based rate authority and an EWG that owns and operates a 50-MW wind facility located within the Bonneville Power Administration (BPA) BAA. All of the power produced by the Condon Facility is sold under Condon’s market-based rate authority under a long-term contract with BPA that expires in 2022. All of the active Class B membership interests in Condon are currently owned by SeaWest Northwest Asset Holdings LLC, an indirect, wholly-owned subsidiary of AES. The remaining passive Class A membership interests in Condon are owned by an unaffiliated tax equity investor.
In this planned transaction, ACE West will pay cash consideration for 100% of the Class B membership interests in AES Mid-West and Condon. The applicants requested commission authorization under FPA section 203(a)(1) for the indirect disposition (and potential merger or consolidation) of the jurisdictional facilities of Storm Lake, Lake Benton and Condon that may result from the transaction. Applicants also requested that the commission authorize the transaction under FPA section 203(a)(2) without making a threshold ruling as to jurisdiction.
ALLETE has option to acquire AES interests in a fourth wind facility
In conjunction with this transaction, ACE West has also entered into an option agreement with an affiliate of AES for the purchase of all of the active Class B membership interests in AES Armenia Mountain Wind LLC, a public utility and owner of a 101-MW wind facility in Pennsylvania. However, the option has not been exercised, and approval of the purchase is not requested at this time.
ALLETE said this deal doesn’t raise any market power concerns. It noted that it is developing a potential six-stage, 600-MW wind project near Center, N.D., with its Bison 1-6 projects. The first 39 MW (net) of Bison Project 1 began commercial operation in December 2010. ALLETE’s remaining 37 MW (net) of Bison Project 1 commenced commercial operation in late December 2011. Bison Project 2 and Bison Project 3 (each 101.2 MW net) commenced commercial operation in January 2013.
ALLETE’s revised Large Generator Interconnection Agreement (LGIA) for Bison Projects 4-6 (each 101.2 MW net) indicate that these facilities are scheduled to commence commercial operation in December 2014, December 2015 and December 2016, respectively. ALLETE has submitted several filings to the Minnesota Public Utilities Commission seeking the necessary approvals to transfer two of the Bison Project’s LGIAs from ALLETE to ACE.
“The proposed Transaction will not have an adverse effect on the rates charged to either wholesale sales or transmission service customers,” the Nov. 15 application said. “Following the proposed Transaction, all wholesale sales of electric energy by Condon, Lake Benton and Storm Lake will continue to be made pursuant to market-based rate authority granted by the Commission or on a market basis pursuant to long-term contracts whose rates will not be changed by the Transaction.”
- The ACE contact is: Maggie Thickens, ALLETE CLEAN ENERGY INC., 30 West Superior Street, Suite 200, Duluth, MN 55802 Tel.: (218) 723-3950 Fax: (218) 723-3955 firstname.lastname@example.org.
- The AES contact is: Wayne Hess, Counsel, THE AES CORP., 4300 Wilson Boulevard, Arlington, VA 22203 Tel: (703) 682-6374 Fax: (703) 528-4510 email@example.com.