Indiana URC approves ownership split for 1,400-MW St. Joseph project

On July 12, the Indiana Utility Regulatory Commission approved a Feb. 5 application from St. Joseph Energy Center LLC (SJEC) and St. Joseph Phase II LLC (SJEC II) for approval of: the transfer of a portion of SJEC’s franchise, works, or system to SJEC II; continued declination of commission jurisdiction over the portions of the power project transferred to SJEC II; and a Shared Facilities Agreement between SJEC, SJEC II and St. Joseph Shared Assets LLC.

Supporting testimony from the companies came from Willard Ladd, Principal at Development Partners Group LLC.

  • SJEC holds the authority to construct, own, and operate the St. Joseph Energy Center, which is an approximately 1,400 MW combined cycle gas turbine (CCGT) plant being constructed in St. Joseph County, Indiana, near the town of New Carlisle.
  • SJEC II was created to hold the assets and rights related to the development of Phase II of the project.

The project consists of two approximately 700-MW CCGT power blocks. One block will be interconnected to the Midcontinent Independent System Operator regional transmission system and the other power block will be interconnected to the PJM Interconnection system. In order to facilitate financing, development, and construction of the project, it was determined that it would be developed in phases.

  • The PJM Block will be constructed and operated through SJEC as Phase I of the project.
  • The MISO Block is proposed to be constructed and operated through SJEC II as Phase II.

Ladd explained why the transfer of Phase II assets and rights from SJEC to SJEC II is important to the financing and development of Phases I and II. Ladd testified that financing for Phase I was completed in November 2015, and that construction of Phase I has begun and is expected to be completed by March 2018, with commercial operations anticipated to begin in June 2018. He stated that construction of the MISO Power Block is expected to commence in the next 12-18 months.

Ladd testified that splitting the project into two phases optimizes the financing, construction, and sale of electric power. Ladd said that SJEC II has the experience, technical and managerial expertise, and financial resources to construct and operate Phase II of the project. He stated that Phase II is being developed by Development Partners and sponsored by investment funds managed by Ares Energy Investment Fund Management LLC (EIF) as well as other third party investors. Ladd stated that EIF was originally founded in 1987 as one of the first U.S. investment fund managers to focus on the independent power industry.

Ladd testified that SJEC II proposes to finance Phase II of the project through a traditional project financing model which has proven to be a successful approach in the power industry. Specifically, he stated that the Phase II debt will be financed through a non-recourse project financing structure, and that the Phase II equity will be funded from EIF’s managed investment funds. He noted that this approach has been utilized on all of ElF’s previous project financings, and explained that in a non-recourse project financing, the assets of the project provide the collateral for the project lenders.

Ladd testified that EIF managed investment funds own approximately 5,100 net MW of capacity in facilities that are currently operating or under construction, and an additional 3,900 net MW in facilities that are in various stages of development. He stated that Phase II will be operated and maintained by a qualified third-party operations and maintenance (O&M) contractor to be identified at a later date, similar to that proposed and approved for Phase I. He stated that the operator will be overseen by Power Plant Management Services LLC (PPMS), a general and administrative services management consulting firm focused on the domestic independent power industry. Ladd said that PPMS will provide O&M contractor interface, construction interface, due diligence, support, and permitting support for the project, and that PPMS has provided services to EIF’s power plants from New England to Hawaii and currently manages a majority of EIF’s facilities.

Said the commission in the July 12 order: “Based on the evidence presented, we approve SJEC’s request to transfer to SJEC II operating and construction authority and other rights and obligations under the Declination Order related to Phase II. Thus, we find that the Phase II Transfer should be approved.”

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.