Because of the urgent need for a reconfiguration of the Kendall cogeneration plant, affiliates of NRG Energy (NYSE: NRG) on Nov. 22 asked the Federal Energy Regulatory Commission for a quick review and approval of the sale of the plant to new owners.
NRG North America LLC (NRG NA) and its wholly-owned subsidiary NRG Kendall LLC, want authorization for the disposition of facilities resulting from NRG NA’s sale of 100% of its common equity ownership in NRG Kendall to Kendall Green Energy Holdings LLC. The buyer is a joint venture consisting of ISQ Thermal Kendall LLC and Veolia Energy North America Holdings (Veolia ENH).
The companies requested a 21-day comment period and expedited consideration of the application. They seek to close the transaction no later than Dec. 31, 2013.
The gas- and oil-fired Kendall plant is about to undergo significant reconfiguration in order to comply with environmental requirements. “Expeditious transfer of the Plant to Kendall Holdings, the new owner who will be responsible for the reconfiguration, will greatly facilitate the reconfiguration process, the ability of the Kendall Plant to serve as an important energy resource for both electricity and steam, and compliance with applicable environmental requirements,” the application said. “Year-end closing will simplify the accounting for the Transaction, thus making it more transparent and facilitating review. Expeditious transfer will benefit employees who will not have to bear the uncertainties associated with changed ownership.”
NRG Kendall is engaged solely in the ownership and operation of the Kendall plant and the sale of the plant’s electric and steam output. Following the transaction, NRG Kendall will continue its corporate existence under ownership of the buyer, although its name will be changed to Kendall Green Energy LLC.
Veolia ENH is wholly-owned by Veolia Environnement North America Operations (VENAO). VENAO is wholly-owned, directly and indirectly, by Veolia Environnement S.A., a French company specializing through its various subsidiaries in the areas of water cycle management, waste management, and energy services. In the U.S., Veolia ENH (inclusive of its affiliates) has very little electric generation. Its total ownership consists of a 10% ownership share of 84.4 MW of generation in the ISO New England market, the relevant market for the transaction, and an additional 230.5 MW of generation elsewhere in the U.S.
ISQ Thermal is an indirect wholly-owned subsidiary of ISQ Global Infrastructure Fund LP, indirectly managed by I Squared Capital Advisors (US) LLC (ISQ). ISQ is a private equity firm with a global presence based in New York that specializes in infrastructure related investments.
The Kendall plant, originally built in 1949 as a cogen, is located in Cambridge, Mass. Modified several times since its original in-service date, the plant now has a total capacity of 256 MW consisting of a steam plant, a combustion turbine generator, steam turbine generators, and a jet. The plant produces electricity which is sold at wholesale and cogenerated steam for steam sales. The plant also has facilities that are dedicated to steam sales and not involved in electric generation.
Due to a reconfiguration needed under U.S. Environmental Protection Agency and Massachusetts water quality requirements, the plant will undergo major changes, including the installation of a new back pressure steam turbine (BPST), the coupling of an existing generator to the BPST, and the retirement of three steam turbines, and the retirement of the two boilers from electric generation. As a result, the plant may lose as much as about 35 MW of its capacity. Post-reconfiguration, the plant’s electric output will only be sold at wholesale, and the plant will continue to produce cogenerated and directly-manufactured steam for sale to steam customers.