Closing of the transaction is expected to occur late in the third quarter or in the fourth quarter of 2019, following a restructuring of the plants' ownership structure by EDF Renewables after the end of relevant tax credit recapture periods. The transaction is not subject to regulatory approval. Atlantic Power will assume operation of the plants at closing, or potentially earlier, subject to negotiation of an agreement with EDF. The purchase will be funded from the company's discretionary cash.
The two plants are identical in design and have been in commercial operation since 2013. The biomass fuel for the plants consists primarily of mill and harvesting residues. All of the output of the two plants is sold to Santee Cooper, a state-owned utility, under Power Purchase Agreements that run to 2043. Under the terms of the PPAs, the plants receive energy payments for energy produced. The fuel cost component of the energy revenues is based on a biomass market index. There is no project-level debt at either plant.
"This acquisition represents our second external growth investment following a three-year business restructuring process. Earlier this summer, we closed the acquisition of the remaining interests in the Koma Kulshan hydro project," said James J. Moore, Jr., President and CEO of Atlantic Power. "We own four biomass plants currently, and we have considerable operational and commercial experience in this area. If we can deliver targeted operational and financial results for both South Carolina plants, the returns should be very attractive compared to other potential uses of our discretionary cash. In addition, the long remaining term of the two PPAs provides a stable base of cash flows."
