Primary Energy Recycling Corp. (TSX: PRI), which generates revenue from capturing and recycling recoverable heat and byproduct fuels from industrial processes, announced Feb. 27 the signing of a new 10-year tolling agreement between Cokenergy and its site host.
The new 10-year contract, which will be in place through Sept. 30, 2023, replaces the previous contract that had been extended beyond its original term during negotiations. The new contract provides for Cokenergy to toll all the electricity and steam generated by the facility to the site host utilizing waste heat from the adjacent baseload coke battery.
The pricing structure under the new contract escalates annually and consists of fixed payments consistent with historical revenues during year one, and a tiered variable structure for the final nine years of the contract term. During the tiered variable structure, the economics of the contract are expected to be substantially similar to those of the original contract provided that Cokenergy performs to pre-specified operating levels which are within historic operating ranges.
As a part of this agreement, Cokenergy expects to complete the approximately US$40m facility upgrade, begun in 2010, by the end of 2015. The upgrade schedule has been substantially accelerated from the original expected completion date of 2018 in order to increase reliability and efficiency of the plant, as well as to maximize project revenues and economics for the company’s shareholders. Major upgrades include, but are not limited to, retubing all 16 boilers, updating the facility’s control system and optimizing the flue gas scrubbing system.
“The final definitive Cokenergy contract demonstrates our ability to collaborate with our site hosts to successfully extend contracts on mutually beneficial terms, just as we have done with the prior contract extensions on Harbor Coal, North Lake and Portside,” said John Prunkl, President and CEO of Primary Energy. “A key component of this new contract is compensation for our performance. Further, with the completion of the Cokenergy contract renewal, the weighted average contract life of our five facilities is now 14 years and our next contract expiration is not until 2020.”
Cokenergy, Primary Energy’s largest facility, is an integrated, first-of-its-kind combined heat and power facility that provides electricity, process steam, and environmental services that are integral to the site host’s steel-making operations.
The Cokenergy facility is located in East Chicago, Ind. International steelmaker ArcelorMittal teamed with Primary Energy to address escalating energy costs and environmental concerns by taking advantage of waste heat generated by an adjacent onsite coke-making facility. Primary Energy collaborated with ArcelorMittal’s management and operations team along with SunCoke Energy (the owner/operator of the coke battery) to develop a 95-MW waste heat recovery, combined heat and power (CHP) facility that provides electricity and process steam to ArcelorMittal’s steel-making operations, said the Primary Energy website. The facility has capacity to supply up to one-fourth of ArcelorMittal’s total electrical requirements or more than half of its process steam needs, replacing onsite, coal-fired generation that was shut down soon after the facility came on-line. The Cokenergy project serves as the pollution control device for the coke battery, substantially reducing SO2 and particulate emissions associated with coke production. Coke plants like this one bake coal into coke for use in the steelmaking process.
Primary Energy, headquartered in Oak Brook, Ill., owns and operates four recycled energy projects and a 50% interest in a pulverized coal facility. These projects have a combined electrical generating capacity of 298 MW and a combined steam generating capacity of 1.8M lbs/hour.