Atlantic Power to acquire ownership interest in 2 biomass plants

By Atlantic Power Corp. | May 16, 2019

Atlantic Power Corp. announced May 15 that it has executed an agreement to acquire, for $20 million, the equity ownership interests held by AltaGas Power Holdings (U.S.) Inc. in two contracted biomass plants in North Carolina and Michigan. The acquisition is subject to the approval of the Federal Energy Regulatory Commission and customary third-party consents. Closing is expected by mid-2019. The purchase will be funded from the Company's discretionary cash.

Craven County Wood Energy is a 48 megawatt (MW) biomass plant in North Carolina that has been in service since October 1990. Atlantic Power will acquire a 50 percent interest in the plant from AltaGas. The remaining 50 percemt interest is held by CMS Energy. Craven County has a Power Purchase Agreement (PPA) with Duke Energy Carolinas that runs through December 2027. The plant burns wood waste, including wood chips, poultry litter, forestry residues, mill waste, bark and sawdust.

Grayling Generating Station is a 37 MW biomass plant in Michigan that has been in service since June 1992. Atlantic Power will acquire a 30 percent interest in the plant from AltaGas. The remaining interests are held by Fortistar (20 percent) and CMS Energy (50 percent). Grayling has a PPA with Consumers Energy, the utility subsidiary of CMS Energy, which runs through December 2027. The plant burns wood waste from local mills, forestry residues, mill waste and bark.

Both plants are operated by an affiliate of CMS Energy. There is no project-level debt at either plant.

"Since last summer, we have announced the acquisitions of five plants – Craven County and Grayling; the remaining ownership interests in the Koma Kulshan hydro facility, which we acquired in July; and the Allendale and Dorchesterbiomass plants in South Carolina, on which we expect to close later this year. The PPAs for these acquired plants run through December 2027, March 2037 and October 2043, respectively," said James J. Moore, Jr., president and CEO of Atlantic Power. "The acquisitions represent a meaningful addition to the level and length of our existing contracted cash flows, and we estimate they will contribute Project Adjusted EBITDA of $8 million to $10 million annually on average through the date of the first PPA expiration. We acquired the five plants at what we consider to be attractive prices."

Moore continued, "As a result of the strengthening of our balance sheet (with more than $1 billion of debt reduction since 2014), reduction in interest and overhead costs (more than $100 million in recurring annual cost savings) and ample liquidity (approximately $198 million at March 31, 2019), we have been able to continue with debt reduction, repurchases of common and preferred shares under our normal course issuer bid and the acquisition of contracted plants that add to our cash flow. We remain focused on cash flow and intrinsic value per share in making these capital allocation decisions."