Diversified utility Exelon Corporation (EXC) said it has signed a deal to buy a combined-cycle natural gas-fired power plant in north Texas, called Wolf Hollow, in order to expand its clean power generation fleet and its presence in the competitive Texas energy market. Exelon will pay $305 million to Sequent Wolf Hollow LLC to acquire the Texas plant.
The 720-megawatt (MW) Wolf Hollow plant is located near Granbury, Texas. The plant has two Mitsubishi combined-cycle gas turbines installed and serves the Dallas and Fort Worth areas. The Wolf Hollow plant began operation in August 2003.
Through this transaction, Exelon hopes to create long-term value by adding an efficient combined-cycle natural gas-fired plant to its fleet, gaining strength in the competitive Electric Reliability Council of Texas (ERCOT) power market. Exelon already owns and operates three other natural gas-fired power plants serving the ERCOT market.
Exelon said it currently has a power purchase agreement with Wolf Hollow, through 2023, to purchase 350 MW of its output at above current observable market power prices. The company expects this proposed acquisition to not only eliminate the existing agreement but to also be accretive to its free cash flow in 2012.
Exelon said the Wolf Hollow plant will be owned and operated by its subsidiary Exelon Generation, which already has a strong and growing presence in the Dallas, Fort Worth and Houston regions. Exelon Generation’s natural gas-fired plants at Handley, Mountain Creek and ExTex LaPorte have a total capacity of 2,222 MW and employ 80 people.
The Wolf Hollow acquisition comes as a step to fulfill Exelon’s commitment to clean energy as part of its Exelon 2020 strategy. Exelon already is the least carbon-intensive among the large U.S. electric utilities.
The Wolf Hollow acquisition proposal followed soon after Exelon’s announcement, last month, to merge with Constellation Energy Group Inc. (CEG). The merger is expected to create one of the industry’s cleanest and lowest-cost power generation fleets.
We expect the acquisition of Wolf Hollow to further add to the benefits from the merger by matching Exelon’s abundant clean energy supply with Constellation’s large customer demand in key competitive markets.
Exelon expects to close the Wolf Hollow transaction in the third quarter of 2011, pending approval of the Public Utility Commission of Texas and the notification and reporting requirements under the Hart-Scott-Rodino Act. Exelon plans to finance the transaction with existing cash flow and other liquidity resources.
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