Calpine to sell Mankato power plant in Minnesota to Southern Power

Calpine Corp. (NYSE: CPN) announced  Sept. 1 that it has agreed to sell the Mankato Power Plant, a 375 MW natural gas-fired, combined-cycle plant located in Minnesota, to Southern Co. (NYSE: SO) subsidiary Southern Power for $395.5 million plus working capital and other customary purchase price adjustments.

“Mankato is a modern, efficient and well-performing plant under long-term contract to the local utility and with an expansion in advanced development. This sale is another step in our capital allocation plan to divest plants in non-core regions when we see an attractive value opportunity,” said Calpine President and CEO Thad Hill.

Mankato provides electricity to the Northern States Power subsidiary of Xcel Energy (NYSE: XEL) through July 2026, pursuant to a tolling agreement. In addition, a 345-MW expansion is currently in advanced development to serve a 20-year tolling agreement with Northern States Power. With this expansion, a natural gas-fired combustion turbine and a heat recovery steam generator will be added, with the incremental steam increasing the power production of the plant’s existing steam turbine and improving the overall efficiency of the plant. Commercial operation of the expanded capacity is expected by June 2019.

Calpine said it expects to redeploy the proceeds of the Mankato sale toward corporate debt reduction and other corporate purposes. The transaction is projected to close in the fourth quarter of 2016, subject to customary closing conditions, antitrust review under the Hart-Scott-Rodino Act and approval from the Federal Energy Regulation Commission.

In other recent news for the expansion project:

  • The Minnesota Pollution Control Agency on Aug. 2 went out for comment until Aug. 31 on a draft air permit covering this new capacity. Mankato Energy Center II LLC proposes to install a new combustion turbine/heat recovery steam generator (HRSG) train converting the existing facility to a 2×1 combined cycle unit. It will generate an additional 345 MW at peak load at winter ambient conditions. The CT will be fired by natural gas only and exhaust to a separate HRSG having a supplementary duct firing capacity of 824 mmBtu/hr. The duct burners will be fired with natural gas. Steam generated by the new HRSG will exhaust to the existing steam turbine. MEC II will install selective catalytic reduction (SCR) and dry low-NOx (DLN) burners to reduce NOx emissions and a catalyst oxidation system to control CO and VOC emissions. The HRSG low-NOx duct burner will be controlled by the SCR and oxidation catalyst.
  • On June 23, the Minnesota Public Utilities Commission approved a site permit issued to Mankato Energy Center II. Said the commission order: “The project is expected to be operational by June 1, 2019, and is estimated to cost between $220 and $300 million dollars. The facility, including the associated land, is owned by Mankato Energy Center I, LLC, and is operated by Calpine Operating Service Company. All Mankato Energy Center legal entities are wholly owned indirect subsidiaries of Calpine Corporation.”

“Southern Power remains committed to the strategic development of a diverse generation mix, and the Mankato Energy Center is an excellent fit for Southern Power’s business model,” said Southern Power President and CEO Buzz Miller in a Sept. 1 statement. “We are proud to serve this region and look forward to expanding the output of the facility to meet the needs of our customers.”

With the addition of the Mankato Energy Center, Southern Power will own 10 combined-cycle and combustion-turbine natural gas-fueled power plants across five states, representing 9,300 MW of generating capacity operating or under development. The project represents Southern Power’s first generating asset within the Midcontinent ISO (MISO).

Southern Power and its subsidiaries own or have the rights to 41 facilities operating or under construction in 11 states with more than 11,700 MW of generating capacity in Alabama, California, Florida, Georgia, Maine, Minnesota, Nevada, New Mexico, North Carolina, Oklahoma and Texas.

Parent Southern Co. has 44,000 MW of generating capacity and 1,500 billion cubic feet of combined natural gas consumption and throughput volume serving 9 million electric and gas utility customers through its subsidiaries. It has electric utilities in four states, natural gas distribution utilities in seven states, a competitive generation company serving wholesale customers across America and a nationally recognized provider of customized energy solutions, as well as fiber optics and wireless communications.

Calpine’s fleet of 84 power plants in operation or under construction represents more than 27,000 MW of generation capacity. It specializes in developing, constructing, owning and operating natural gas-fired and renewable geothermal power plants that use advanced technologies to generate power in a low-carbon and environmentally responsible manner.

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.