FERC okays power asset side of Alcoa reorganization plan

The Federal Energy Regulatory Commission (FERC) on Aug. 24 approved a July 12 application from Alcoa Inc. and Alcoa Power Generating Inc. for authorization for an upstream change in ownership of Alcoa Power, including its wholly owned subsidiary, Alcoa Power Marketing LLC, from Alcoa Inc. to a newly-created company, Alcoa Corp.

Alcoa Inc., the parent company of Alcoa Power, will be reorganized into two independent, publicly-traded companies. One will be Alcoa Upstream Corp. (to be renamed Alcoa Corp. prior to the separation). Alcoa Inc.’s present value-add businesses will remain with the present company, which will be renamed Arconic Inc. The reorganization and eventual separation of these companies is expected to be completed in the second half of 2016. As a result of the reorganization, Alcoa Power will move from being a subsidiary of Alcoa Inc. (soon to become Arconic) to being a subsidiary of Alcoa Corp.

Alcoa Inc. is a vertically-integrated company producing an array of aluminum products, ranging from the raw materials of bauxite and electric energy to finished industrial products. Alcoa Inc.’s generating assets that supply its operations in the United States are held through Alcoa Power.

Alcoa Power owns and operates limited generation and limited and discrete transmission facilities in various locations throughout the United States that are used in conjunction with its primary focus of providing electric power to aluminum manufacturing facilities owned by Alcoa Inc. Alcoa Power is authorized to make wholesale sales of energy, capacity, and ancillary services at market-based rates.

Alcoa Power has transmission and generation facilities in five divisions:

  • The Tapoco Division owns limited and discrete 161-kV transmission facilities that connect Alcoa Inc. industrial plants located in Alcoa, Tennessee, in a 3-way interconnection to Smoky Mountain Transmission LLC and the Tennessee Valley Authority
  • The Yadkin Division owns and operates four hydroelectric developments near Badin, North Carolina, with a total summer rating of approximately 212 MW. The power generated was supplied to Alcoa Inc., which is no longer in operation in the region but continues to have an electricity load of approximately 1 MW. The bulk of the power is sold into the wholesale market. Yadkin is its own balancing authority area (BAA), owning and operating approximately 21 miles of 13.8 kV and 100 kV transmission lines that interconnect with the Duke Energy Carolinas and Duke Energy Progress BAAs.
  • The Long Sault Division owns certain limited and discrete transmission facilities in New York used to connect Alcoa Inc.’s smelting and fabricating facility near Massena, New York, with the New York Power Authority (NYPA), National Grid US (NGrid) and Cedars Rapids Transmission Co. The Cedars Lines are two 115 kV transmission circuits that connect at mid-span at the International Boundary with Canada to corresponding facilities that belong to Cedars Rapids. The Cedars Lines are owned by the Long Sault Division and only connect NGrid to Cedars Rapids. These double-circuit 115 kV transmission lines are each approximately six miles in length and the capacity is under a long-term contract to Cedars Rapids through 2035. Additionally, there are three Moses-Alcoa 115 kV transmission lines that are owned 85% by Long Sault and 15% by NYPA. These lines connect NYPA’s St. Lawrence-FDR hydroelectric project to the Alcoa Inc. manufacturing complex in Massena, New York. Long Sault also uses these lines to provide transmission service for the Town of Massena under a long-term contract.
  • The Colockum Division owns and operates approximately 1,000 feet of transmission facilities that interconnect the Bonneville Power Administration’s Valhalla substation and the Public Utility District No. 1 of Chelan County’s McKenzie substation with Alcoa Inc.’s smelting plant near Wenatchee, Washington. Colockum also has a long-term power purchase agreement with Chelan for the purchase of power for use in Alcoa Inc.’s smelting plant, which is presently curtailed.
  • The AGC Division owns most of a four-unit, coal-fired station adjacent to Alcoa Inc.’s Warrick smelting and rolling operations (Warrick Plant) located in Evansville, Indiana. In response to global market conditions for aluminum metal, Alcoa Inc. permanently closed the Warrick smelter on March 24, 2016. The rolling mill and power generation at the Warrick Plant continue to operate, and upon completion of the reorganization, the rolling mill assets will be owned by Alcoa Corp. Of the four coal-fired generation units at AGC, Alcoa Power wholly owns three of the units (Units 1 through 3) with industrial-classed generators, and owns 50% of the larger coal unit (Unit 4), which is a utility-classed generator. The other 50% of Unit 4 is owned by Southern Indiana Gas and Electric. All four of these units interconnect with the grid at Southern Indiana’s 138 kV Culley Substation, which is operated by the Midcontinent Independent System Operator. Alcoa Power also owns certain 138 kV transmission facilities that are used to deliver power from AGC to the Warrick Plant and to Southern Indiana’s transmission system. Some of the transmission facilities are fully owned by Alcoa Power, and some are owned jointly with Southern Indiana.

Alcoa Power Marketing is a wholly owned subsidiary of Alcoa Power. Alcoa Power Marketing has no franchised service territory in any state for the sale of natural gas or electricity, nor does it own or operate any generation or transmission facilities. Alcoa Power Marketing has no captive wholesale or retail customers, and is not affiliated with any franchised electric or natural gas utility or any entity with captive wholesale customers. Alcoa Power Marketing sells power at wholesale pursuant to its market-based rate authority.

The Yadkin hydro facilitiies are to be sold

Incidentally, Alcoa Power Generating Inc. (APGI), Cube Yadkin Generation LLC (Genco) and Cube Yadkin Transmission LLC (Transco) applied July 25 at the Federal Energy Regulatory Commission for authorization for the sale and transfer by APGI of 100% of its ownership interests in the Yadkin Hydroelectric Project, and the sale and transfer by APGI of 100% of its ownership interests in certain transmission facilities and related jurisdictional assets. 

Following the proposed transaction, Genco will directly own and operate the Yadkin Project, and Transco will directly own and operate the Yadkin Transmission Facilities. APGI will no longer hold any ownership interests in the Yadkin Project or Yadkin Transmission Facilities. The parties said they intend to close the transaction on or about Nov. 1, 2016, subject to obtaining all necessary regulatory approvals and satisfaction of other conditions precedent agreed to by the parties.

APGI’s Yadkin Division owns and operates the Yadkin Project, consisting of four hydroelectric stations near Badin, North Carolina, with a total summer rating of approximately 221 MW. The four stations include:

  • the High Rock Station (approximately 33 MW summer rating);
  • the Tuckertown Station (approximately 39 MW summer rating);
  • the Narrows Station (approximately 119 MW summer rating); and
  • the Falls Station (approximately 30 MW summer rating).

These buyers are wholly-owned direct subsidiaries of Cube Hydro Carolinas LLC, which in turn is a wholly-owned direct subsidiary of Helix Partners LLCHelix HoldCo LLC directly owns 98.5% of the membership interests in Helix Hydro Partners. Helix HoldCo is directly owned by ISQ Hydro Aggregator LLC (62.5%) and ISQ Helix Aggregator LLC (28.1%). Both ISQ Hydro Aggregator and ISQ Helix Aggregator are indirectly controlled by I Squared Capital, a private equity investment manager having a series of limited partnership investment funds operated by a general partner that is wholly controlled by I Squared Capital.

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.