FERC okays Duke buy of jointly-owned coal and nuclear assets

The Federal Energy Regulatory Commission on Dec. 9 approved the Duke Energy Progress unit of Duke Energy (NYSE: DUK) to buy generating assets from the North Carolina Eastern Municipal Power Agency.

On Oct. 10, Duke Energy Progress filed an application requesting authorization to acquire the interests of North Carolina Eastern Municipal Power Agency in certain generating units that Duke Progress jointly owns with the agency. Also on Oct. 10, Duke Progress filed a new cost-based full requirements power purchase agreement between itself and agency and proposed amendments to five wholesale cost-based power sales agreements pursuant to which Duke Progress’ demand charges are calculated pursuant to a cost-of-service formula rate.

The agency is a municipal joint action agency that serves as the all-requirements bulk power supplier to 32 cities and towns in eastern North Carolina that formerly were wholesale electric service customers of Carolina Power & Light (the predecessor of Duke Energy Progress) or Virginia Electric and Power.

The units now owned jointly are: Brunswick Unit 1, a nuclear unit located in Southport, North Carolina with a Nuclear Regulatory Commission (NRC) license that expires in 2036 and a capacity of approximately 938 MW; Brunswick Unit 2, a nuclear unit also located in Southport, North Carolina with an NRC license that expires in 2034 and a capacity of approximately 932 MW; Shearon Harris Unit 1, a nuclear unit located in in New Hill, North Carolina with an NRC license that expires in 2046 and a capacity of approximately 928 MW; the Mayo Station, a coal-fired facility located in Roxboro, North Carolina with a capacity of approximately 727 MW; and the Roxboro Station Unit 4, a coal-fired unit located in Semora, North Carolina with a capacity of approximately 698 MW.

The Power Agency’s ownership interests in these facilities represent approximately 701 MW of generating capacity (approximately 493 MW of nuclear capacity and 208 MW of coal-fired capacity), as follows: 18.33 percent or 171.9 MW in Brunswick 1; 18.33 percent or 170.8 MW in Brunswick 2; 16.17 percent or 150.1 MW in the Harris Unit; 16.17 percent or 117.6 MW in the Mayo Plant; and 12.94 percent or 90.3 MW in the Roxboro unit.

“Duke Progress states that it has entered into an asset purchase agreement with Power Agency pursuant to which Power Agency will sell and Duke Progress will purchase the Joint Units for a purchase price of $1.2 billion, subject to certain adjustments for capital expenditures incurred by Power Agency after January 1, 2015 and prior to closing,” FERC noted. “Duke Progress also states that, assuming the Proposed Transaction closes at the end of 2015, the purchase price, which is capped at $1.278 billion, would reflect an acquisition adjustment of approximately $343 million. Duke Progress asserts that the agreement resulted from an arms-length negotiation in which Power Agency sought a price that would enable it to retire a substantial amount of its outstanding debt.  Duke Progress states that it sought to acquire these interests at a price that would enable its retail and wholesale customers to obtain lower overall rates over the lives of the Joint Units.”

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.