Portland General Electric said in a Dec. 21 filing with the SEC that due to the financial problems for contractor Abengoa S.A., it is working out alternative arrangements to complete construction of its gas-fired Carty power plant.
On Dec. 7, Portland General Electric (PGE) filed a prior report with the SEC in which the company disclosed certain developments concerning the construction of a 440-MW natural gas-fired plant in eastern Oregon known as the Carty Generating Station. In that report, the company disclosed that in 2013 it had entered into an agreement (Construction Agreement) with Abeinsa Abener Teyma General Partnership, an affiliate of Abengoa S.A., and affiliates of Abeinsa Abener Teyma General Partnership (Abeinsa), for the construction of Carty, and that, on Nov. 25, Abengoa S.A. had filed a notice under Article 5bis of the Spanish Bankruptcy Act, indicating its intent to initiate attempts to reach out of court debt restructuring agreements with its lenders.
In addition, Portland reported that it was currently funding certain of the work pursuant to an agreement with Abeinsa and would offset such funding against amounts payable by PGE to Abeinsa under the Construction Agreement. Work on the project began to proceed more slowly on Nov. 25 and Abeinsa ceased construction activities on the project on Dec. 14, PGE reported.
On Dec. 18, Portland declared Abeinsa in default under the Construction Agreement and terminated the agreement, effective immediately. PGE said it has initiated discussions with Liberty Mutual Surety and Zurich North America, the sureties who provided a performance bond of $145.6 million under the Construction Agreement, and with contractors, to enter into agreements to complete work on the Carty project.
PGE is also initiating negotiations with the sureties regarding an agreement under which PGE and the sureties would fund work on the project during an interim period pending final determination of the sureties’ obligations under the performance bond. Construction is expected to resume during the week of Dec. 21. As of the date of this report, PGE estimates that construction of Carty is approximately 75% complete.
Said PGE: “Until a final determination is made with respect to the sureties’ obligations under the performance bond, the Company cannot estimate the impact of the foregoing developments on the total costs that the Company will incur to complete the Project. The foregoing developments have also created additional uncertainty concerning the completion date of the Project. Once construction has resumed and the Company has completed an assessment of the current status of the Project, the Company will provide an update on the expected costs and completion date for the Project.”
Under a final order issued on Nov. 3 by the Public Utility Commission of Oregon (OPUC) in connection with the company’s 2016 General Rate Case filing, capital costs of $514 million for Carty will be included in customer prices when the plant becomes operational, provided that occurs by July 31, 2016. If actual capital costs exceed this amount, PGE will not recover the additional costs at that time. However, PGE said it may seek recovery of the additional capital costs in a subsequent general rate case proceeding.
If the expected date of completion of construction of Carty were to be delayed beyond July 31, 2016, PGE would pursue one or more alternative avenues to obtain new OPUC approval for the inclusion of Carty costs in customer prices. Under this circumstance, the company might not be able to recover some or all of the net revenue requirements for Carty from the date Carty is placed into service until the time when new customer prices for Carty are approved by the OPUC.
Said Abengoa in a brief statement posted to it website on Dec. 15: “Abengoa, S.A. (‘Abengoa’ or the ‘Company’), pursuant to article 228 of the Spanish Securities Market Act (Texto Refundido Ley del Mercado de Valores), informs the Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores) of the following. In connection with the material facts published on 25 and 27 November 2015 (nº231387 and 231488), the Company hereby informs that the Mercantile Court of Seville nº 2 has published today the Decree by virtue of which it agrees to admit the filing of the communication set forth under article 5 bis of the Insolvency Law.”