Southern Company subsidiary Southern Power has agreed to sell its 115MW Nacogdoches Generating Facility, a wood-fired biomass plant, located in Sacul, Texas, to Austin Energy for $460m.

Southern Power

Image: Southern Power to sell biomass plant in Texas to Austin Energy. Photo: Courtesy of WikimediaImages/Pixabay.

Southern Power started commercial operations at the biomass plant in 2012 and has been selling 100MW of the power generated from the plant to Austin Energy under a 20-year power purchase agreement (PPA).

According to Southern Power, the sale is subject to customary closing conditions and is expected to be completed in the middle of this year. Proceeds from the sale will be used to strengthen Southern Company’s balance sheet and will help in meeting its projected equity needs and de-risk financing plans.

Southern Power president and CEO Mark Lantrip said: “The Nacogdoches Generating Facility is one of the largest wood-fired biomass plants in the United States and has been a part of Southern Power’s generation fleet since 2012, demonstrating strong operating performance.

“This transaction provides benefits to Southern Power and offers Austin Energy the opportunity to own a significant regional energy resource. Southern Power will continue providing clean, safe, reliable and affordable wholesale energy to customers with a diverse group of assets that includes one of the largest carbon-free renewable energy portfolios in the United States.”

By acquiring this power plant, Austin Energy said that it can avoid $275m in additional costs over the remaining term of the agreement. While the electric utility, Austin Energy, will remain the owner of the plant after the completion of the deal, no immediate changes in operation at the facility are expected to take place.

Austin Energy general manager Jackie Sargent said: “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.

“This transaction is consistent with our efforts to manage our portfolio of generation resources in a responsible and cost-effective manner.”

Austin Energy aims to source 65% of its energy requirements through renewable resources by 2027. Last year, the company claims to have generated 38% of its total energy from renewable sources such as wind, solar and biomass energy.