New entity formed related to power plant transfer in Dow/Olin deal

Blue Cube Operations LLC on May 8 filed with the Federal Energy Regulatory Commission for market-based rate authority related to a corporate reorganization involving two power plants.

Blue Cube is a wholly-owned subsidiary of The Dow Chemical Co. Blue Cube was formed by Dow in furtherance of a recently-announced transaction between Dow and Olin Corp. under which Dow is to separate its U.S. Gulf Coast Chlor-Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses, and then merge those businesses with Olin in a Reverse Morris Trust transaction. The transaction is to be completed in two phases.

  • The first phase, which closed on May 1, consists of an internal reorganization under which the businesses that are subject to the transaction were transferred to direct and indirect wholly-owned subsidiaries of Dow, including Blue Cube.
  • In the second phase, which is anticipated to close in the third or fourth quarter of 2015, ownership of the subsidiaries that acquired the businesses that are subject to the transaction, including Blue Cube, will be transferred to Olin or a subsidiary of Olin.

Among the assets that were transferred to Blue Cube as part of the initial internal reorganization are generation resources located at a Dow plant site in Freeport, Texas, within the Electric Reliability Council of Texas (ERCOT). Approximately 563 MW of Dow-affiliated capacity at the site was transferred to Blue Cube. Blue Cube also leased from Dow an undivided 19.86% interest in approximately 1,382 MW of capacity located at a Dow plant site in Plaquemine, Louisiana.

All of the generation at both the Freeport and Plaquemine sites has been certified as Qualifying Cogeneration Facilities (QF) within the meaning of Section 201 of the Public Utility Regulatory Policies Act of 1978 (PURPA) and Section 292 of the commission’s regulations. The generation is used primarily to support chemical manufacturing and industrial operations at the Freeport and Plaquemine sites. However, excess energy and, to a lesser extent, capacity, is periodically sold to third parties when not required for plant operations.

Wholesale sales made from the Freeport facilities are made into the ERCOT market and are, therefore, not subject to FERC’s jurisdiction. Wholesale sales made from the Plaquemine facilities are subject to the commission’s jurisdiction and are currently made pursuant to market-based rate authorizations granted to Dow, and to another wholly-owned subsidiary of Dow, Dow Pipeline Co. Blue Cube is filing the May 8 application in order to secure the market-based rate authority necessary to continue making such sales following the lease of generation at the Plaquemine site.

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.