Atlantic Power Corp. (NYSE: AT) (TSX: ATP) announced Dec. 22 an agreement with Equistar Chemicals LP, a subsidiary of LyondellBasell, to modify and extend the expiration of its Energy Services Agreement (ESA) for its Morris power plant in Illinois from November 2023 to December 2034.
The facility’s ground lease and equipment leases also have been extended to the new ESA expiration date. The changes to the ESA become effective Jan. 1, 2016.
“The modified agreement extends our relationship with an important customer while also extending our presence and participation in the PJM power market,” said James J. Moore, Jr., President and Chief Executive Officer of Atlantic Power.
Morris is a 177-MW natural gas combined-cycle facility that entered commercial operation in 1998. It is located in Morris, Illinois, approximately 60 miles from Chicago, and is in the ComEd zone of PJM Interconnection. Equistar is the primary customer for the project’s steam output. The remaining capacity and energy as well as ancillary services are sold into the PJM market.
Separately, and not related to the ESA modifications and extension, Atlantic Power said it expects that Morris will undergo an approximately six-week major maintenance outage in the late summer of 2016. Morris is also expected to undergo a shorter routine outage in the spring. During these outages, the company will continue work on upgrades to its combustion turbines and steam turbine generator, which are expected to enhance availability and reliability.
The extension of the Morris ESA increases the average remaining life of the company’s Power Purchase Agreements (PPAs) from 7.2 years to 7.6 years (on an EBITDA-weighted basis).
Moore added: “We expect the changes to the ESA will result in modestly higher Project Adjusted EBITDA from Morris on average relative to the original contract. The terms of this amendment and extension were achieved despite very challenging power market conditions. This is an indication of the value of reliable, well-located projects and strong customer relationships. Now that we have significantly reduced our debt and overhead costs, we are in a better financial position to be patient and disciplined in considering PPA extensions depending on customer needs, market conditions and terms.”
Atlantic Power owns and operates a diverse fleet of power generation assets in the U.S. and Canada. Atlantic Power’s projects in operation have an aggregate gross generation capacity of approximately 2,141 MW, in which its aggregate ownership interest is about 1,504 MW. The company’s current portfolio consists of interests in 23 operational power generation projects across nine states in the United States and two provinces in Canada.