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AltaGas looks to meet clean energy demand with US$515 mln Blythe Energy deal

Published: 13:27 25 Mar 2013 EDT

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Energy infrastructure company AltaGas (TSE:ALA) on Monday announced that it has inked a US$515-million deal to buy Blythe Energy, as part of its efforts to expand its power business.

Shares of the company fell 3.3 percent as at about 1:30 p.m. EDT, trading at $34.85. 

The company said that its subsidiary, AltaGas Power Holdings, will acquire Blythe Energy - which owns a 507-MW, natural gas-fired, combined cycle plant, associated major spare parts, and a related 230-kV, 67-mile electric transmission line in Southern California.

The deal will be financed with AltaGas' current capital structure, and is expected to close in the second quarter of 2013.

“The power purchase agreement provides stable earnings and cash flow and with the infrastructure in place today, the facility is well positioned to access two premium power markets in California and Arizona in the future," said AltaGas chairman and CEO David Cornhill.

“The addition of natural gas-fired power generation to our energy infrastructure portfolio in the U.S. provides another platform for growth to meet the increasing demand for clean sources of energy."

AltaGas said it expects the deal to be accretive to earnings and cash flow per share in 2014, the first full year of ownership, and is expected to add about $50 million in “incremental contracted” earnings before interest, taxes, depreciation, and amortization (EBITDA) per year.

The Blythe Energy Center is contracted under a power purchase agreement through to July 2020 with Southern California Edison, the company noted, adding that the demand for cleaner energy sources, including natural gas, in North America is a “key driver” for potential future growth. 

The power plant is located on an owned 76-acre site in Blythe, California, which AltaGas said provides “a significant geographic footprint” for future expansion.

The company also said that the Blythe facility is one of the most economic natural gas generating facilities on the California Independent System Operator dispatch curve.

The facility is interconnected with the El Paso Natural Gas system and is ready to re-connect to the Western Area Power Administration after the power purchase agreement expires.

 

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