Austin Energy has reached an agreement with Southern Power to acquire the Nacogdoches generating facility, a wood waste biomass-fueled power plant in East Texas. The asset has a price tag of $460 million.
The 115-megawatt plant began commercial operation in 2012 and provides 100 megawatts of renewable energy to Austin Energy under a 20-year power purchase agreement. The transaction, which is expected to close in mid-2019, will enable Austin Energy to avoid about $275 million in additional costs over the remaining term of the agreement.
A trio of green sources
Austin Energy has set a target of offsetting 65 percent of its customers’ energy needs with renewable resources by 2027. In 2018, wind, solar and biomass energy combined to offset 38 percent of the energy needed to serve Austin Energy’s customers.
“Acquiring the biomass plant relieves our obligation to make escalating capacity payments to a third party and, over time, reduces the associated cost impacts to our customers,” Jackie Sargent, Austin Energy’s general manager said in a prepared statement.
“Saving $275 million is a great result!” added Austin Mayor Steve Adler. “We play the hand we’re dealt, and here it means we’ll be able to provide value for our customers and maintain leadership on renewable sources of power. We’ve been working since I got into office to get a better financial deal around the biomass plant.”
JP Morgan is providing transaction support and Husch Blackwell is serving as outside legal counsel to Austin Energy in relation with the purchase. Barclays is serving as the financial advisor and Baker Botts is serving as primary legal counsel to Southern Power.