Constellation NewEnergy to take over Georgia biomass-fired project

Due to a change in control for this developer of a 42-MW biomass-fired power project, Albany Green Energy LLC on July 3 applied with the Georgia Public Service Commission for some changes in its power purchase agreement with Georgia Power.

Albany Green Energy (AGE) and Georgia Power are parties to a “Contract For The Purchase of Firm Capacity And Energy From a Renewable Qualifying Facility Utilizing Proxy Methodology,” dated Nov. 1, 2013. Under this deal, AGE will sell to Georgia Power electric energy and capacity associated with the approximately 42 MW (net) biomass cogeneration plant that is currently being developed by AGE in Albany, Ga.

For more than eighteen months, AGE and its affiliates have been working closely with The Procter & Gamble Paper Products Co. (P&G) to develop the facility. “The construction, operation and ownership of the Facility will provide long term jobs in Georgia and utilize a plentiful Georgia-based renewable fuel source, while helping establish and diversify Georgia’s renewable installed generation base, which is one of the key objectives of the Commission and Georgia Power,” the July 3 filing noted. “Moreover, the Facility will be co-located with, and provide a significant amount of renewable energy generated steam to, the paper manufacturing facility of P&G in Albany, Georgia (the ‘Albany Plant’), which is one of the largest industrial customers of Georgia Power and one of the largest employers in the Albany area.  As such, the project has the potential to make the Albany Plant P&G’s single largest renewable energy site globally.”

During the course of the negotiations with P&G, AGE and P&G have worked with numerous potential investors. On May 15, Sterling Planet Holdings Inc., an affiliate of AGE, and Constellation NewEnergy Inc., an independent power producer with access to significant financial resources and technical expertise that desires to finance, construct, own and operate the facility, entered into a letter of intent (LOI).

Under the LOI, Sterling Planet and Constellation agreed to negotiate, among other documents, a purchase and sale agreement (PSA), pursuant to which Sterling Planet would cause the sale of AGE to Constellation or its designee, subject to the terms and conditions to be set forth in the PSA. The entire project is in the final stages of formal due diligence by P&G and Constellation. One of the closing conditions under the PSA will be the finalization and execution of the Steam Supply Agreement and Ground Lease between AGE and P&G.

AGE, P&G and Constellation anticipate that on or about Sept. 1, the closing of the transactions contemplated under the PSA is anticipated to occur. Prior to AGE’s selection of Constellation as a strategic investor, AGE, working with P&G, began initial construction activities in December 2013 and has continuously worked on those construction efforts since.

DCO Energy picked as the EPC contractor for this project

In connection with negotiating the PSA, Constellation has selected DCO Energy LLC as its preferred engineering, procurement and construction contractor to finalize construction of the facility, subject to the execution of a binding engineering, procurement and construction contract, which is also under final negotiations. DCO has informed Constellation that, following the closing date, it will take 33 months, commencing upon the anticipated construction notice to proceed date of Sept. 1, 2014, to complete construction of the facility and achieve commercial operation.

Without significant extensions that reflect the particular factors associated with the project, the project is not expected to be economically viable and the benefits associated with the facility, including with respect to P&G’s goals for its Albany Plant and more broadly as part of P&G’s corporate sustainability goals, are unlikely to be realized, the filing said.

Based upon the 33-month schedule provided by DCO and a contemplated construction notice to proceed date of Sept. 1, Constellation contemplates achieving the Required Commercial Operation Date (RCOD) on or about June 1, 2017. Accordingly, the company requests that the contracted RCOD be changed from Dec. 1, 2015, to June 1, 2017.

Based upon such RCOD of June 1, 2017, Albany Green Energy also requests that the contract term be extended to May 31, 2037, so the agreement remains a 20-year term.

In connection with the closing contemplated under the PSA, Constellation and DCO will form a new limited liability company (NewCo) to acquire and own AGE. NewCo will be owned by Constellation and DCO, or affiliates thereof, in percentages yet to be determined during construction, and will be owned 90% by Constellation or an affiliate and 10% by DCO after the facility is completed. The closing under the PSA will constitute a Change of Control Transaction, which requires the consent of Georgia Power.

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.