Several units of Energy Future Holdings on Dec. 10 applied at the Public Utility Commission of Texas for approval of their recently-announced buy of two gas-fired power plants in Texas.
Luminant Generation Co. LLC, Big Brown Power Co. LLC, Oak Grove Management Co. LLC, Sandow Power Co. LLC and Tradinghouse Power Co. LLC filed the application for approval of the proposed acquisition by their direct parent company, Luminant Holding Co. LLC, of 100% of the membership interests in La Frontera Holdings LLC, the indirect owner of two natural gas-fired power plants located in the Electric Reliability Council of Texas power region.
On Nov. 25, Luminant Holding executed a Purchase and Sale Agreement (PSA) to acquire 100% of the membership interests in La Frontera from La Frontera Ventures LLC. La Frontera controls Lamar Power Partners LLC and FPLE Forney LLC, each of which is a registered power generation company with the Public Utility Commission of Texas.
The applicants said the installed generation capacity of Luminant after this buy will not exceed the 20% statutory limitation in state law. The combined generating capacity will equal either 16,104 MW or 16,177 MW, depending on how it is counted, which is about 18% of the total installed generation capacity located in, or capable of delivery into, ERCOT.
Because this total will be below the 20% limitation, applicants asked the commission to approve the transaction on an expedited schedule, with a final decision at the open meeting currently scheduled for Feb. 11, 2016.
At the time of commission staff’s most recent estimate (in March 2015) of the installed generating capacity in ERCOT, Luminant Power owned and controlled, in ERCOT, 15,745 MW of capacity. Since that March 2015 report, Luminant Power permanently retired 1,584 MW of gas-fired capacity. In addition, of the 15,745 MW included in the March 2015 report for Luminant Power facilities, 907 MW is “grandfathered capacity” that, in calculating the 20% capacity limitation, must be deducted from the numerator, and is also to be deducted from the denominator, per the rulemaking record for the applicable rule. Specifically, each of Luminant Generation’s Lake Hubbard units is subject to the “grandfathered facility” exemption because each is located in an ozone non-attainment area. As of the time of Staff’s March 2015 estimate, the Lake Hubbard units totaled 907 MW of capacity. If calculated by using the Staff’s March 2015 estimate and deducting both the permanently retired capacity and the grandfathered capacity, the total installed capacity owned and controlled by Luminant Power in ERCOT prior to consummation of this transaction would be 13,254 MW.
That recently-retired capacity, which had been mothballed for some time before that, includes:
- At the Valley plant in Fannin County, Units 1, 2 and 3; and
- At the Permian Basin plant in Ward County, Unit 6.
As of staff’s March 2015 estimate of installed generating capacity in ERCOT, Forney owned and controlled 1,810 MW of installed capacity, and Lamar owned and controlled 1,040 MW of installed capacity. Thus, if calculated using staff’s March 2015 data, their pre-transaction total installed capacity in ERCOT would be 2,850 MW.
Luminant announced Nov. 27 that it has entered into a definitive agreement to acquire these assets. It has agreed to purchase NextEra Energy‘s (NYSE: NEE) La Frontera portfolio, which consists of the Forney Energy Center and the Lamar Energy Center, both located in Northeast Texas. The deal involves a $1.313 billion purchase price ($440 per installed kilowatt) plus approximately $239 million for cash and about $37 million for net working capital, subject to customary adjustments based on the amounts of cash and net working capital at closing. The transaction is expected to close in the spring of 2016, pending customary regulatory approvals.
- The Forney Energy Center is located in Forney, Texas. It has a capacity of 1,912 MW with a commercial operation date of 2003.
- The Lamar Energy Center is located in Paris, Texas. It has a capacity of 1,076 MW with a commercial operation date of 2000.
This buy will be from NextEra Energy Resources LLC, the competitive energy subsidiary of Florida-based NextEra Energy. A NextEra Energy Resources affiliate will continue to operate both of the facilities included in the sale for an initial period of up to one year.