FERC signs off on Calpine’s sale of the Mankato plant in Minnesota

The Federal Energy Regulatory Commission on Oct. 21 approved Calpine Corp.’s (NYSE: CPN) planned sale of the 300-MW Mankato power plant in Minnesota to Southern Power, a unit of Southern Co. (NYSE: SO).

On Sept. 1, Calpine’s Mankato Energy Center LLC and Southern Power requested commission authorization for Southern Power to acquire 100% of the membership interests in Mankato from New Steamboat Holdings LLC. Mankato is an indirect subsidiary of Calpine Corp.

Mankato owns and operates a 300-MW combined-cycle plant located in the Town of Mankato, Blue Earth County, Minnesota. The Mankato Facility is interconnected to the transmission network controlled by Midcontinent Independent System Operator (MISO). The output of the Mankato Facility is fully committed to Xcel Energy‘s (NYSE: XEL) Northern States Power subsidiary pursuant to a long-term agreement. Neither Southern Power nor any of its affiliates owns or control jurisdictional generation facilities, directly or indirectly, within the MISO market.

Calpine Corp. had announced this deal on Sept. 1, saying it is worth $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 at the time.

Mankato provides electricity to the Northern States Power 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.

“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.”

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 this Oct. 21 approval from FERC.

In other recent news for the expansion project, the Minnesota Pollution Control Agency was out for comment until Aug. 31 on a draft air permit covering the 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.

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.