Power sales deal for AES wind farm in Texas to expire in December

AES Corp. (NYSE: AES) has 877 MW of wind capacity in the U.S., located in California, Pennsylvania, Texas and West Virginia, with one of these wind farms to lose its long-term power purchase agreement at the end of this year.

Typically, these facilities sell under long-term PPAs, AES noted in its Feb. 26 annual Form 10-K report.

Buffalo Gap is located in Texas and is comprised of three wind projects with an aggregate capacity of 524 MW. Each wind project operates under its own PPA. The energy price of the entire production of Buffalo Gap I (121 MW) is guaranteed by a PPA expiring in 2021. The PPAs of Buffalo Gap II (233 MW) and Buffalo Gap III (170 MW) guarantee the energy price of 80% of the installed capacity while the energy price for the remaining 20% is dictated by the prices in the Electric Reliability Council of Texas (ERCOT) market. The PPAs of Buffalo Gap II and Buffalo Gap III expire in December 2017 and December 2015, respectively. Once the PPAs expire, the entire installed capacity of Buffalo Gap will be exposed to the volatility of energy prices in the ERCOT market which could adversely affect revenues, AES pointed out.

Laurel Mountain is a wind project located in West Virginia with an installed capacity of 98 MW. It does not operate under a long-term contract and sells its entire capacity and power generated into the PJM Interconnection market. The volatility and fluctuations of energy prices in PJM have a direct impact in the results of Laurel Mountain.

In November 2013, AES executed an agreement for the sale of its 100% membership interests in three wind projects with an aggregate generation capacity of 234 MW: Condon in California, Lake Benton I in Minnesota and Storm Lake II in Iowa. Under the terms of the sale agreement, the buyer has an option to purchase the company’s 100% interest in Armenia Mountain, a 101-MW wind project in Pennsylvania at a fixed price of $75 million. The option is exercisable between January 2015 and April 2015.

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.