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AltaGas Buying Three NatGas-Fired Power Plants in California For $642M

Calgary-based AltaGas Ltd.’s U.S. unit has agreed to buy three natural gas-fired power plants in central California's San Joaquin Valley -- with a combined capacity of 523 MW -- for $642 million.

AltaGas Power Holdings (U.S.) Inc. said it will acquire GWF Energy Holdings LLC from Highstar Capital IV LP and some of its affiliates. GWF's portfolio includes the Tracy Combined Cycle plant (330 MW) in Tracy, CA; the Hanford Peaker Plant (97 MW) in Hanford, CA; and the Henrietta Peaker Plant (96 MW) in Lemoore, CA.

According to AltaGas, all three of the facilities are under power purchase agreements (PPA) through 4Q2022 with Pacific Gas & Electric Co. (PG&E).

"The PPAs are structured as tolling arrangements for 100% of the energy, capacity and ancillary services," AltaGas said, adding that an interconnection at the Tracy plant to PG&E's supply of natural gas "allows for avoidance of incremental transportation charges resulting in a cost advantage for the facility."

The Hanford and Henrietta plants are connected to Sempra Energy's Southern California Gas Co., AltaGas said. All three plants are connected to PG&E's electric transmission system.

Highstar's Star West Generation LLC said the Tracy plant was originally constructed as a 170 MW peaking plant in 2001, was converted to a combined-cycle plant beginning in 2011 and went commercial in 2012. Meanwhile, the California Energy Commission said the Hanford and Henrietta plants entered service in 2001 and 2002, respectively.

The deal is expected to close at the end of 4Q2015. Pursuant to the sale, AltaGas said it has agreed to sell 8.76 million shares at $34.25.

The acquisition will add to AltaGas's growing power generation portfolio. At the end of 2014, the company's power generation segment had 1,285 MW of capacity, which included gas-fired, coal-fired, wind, biomass and run-of-river assets. Last January, it completed its acquisition of three U.S. gas-fired power plants -- two in California and one in Colorado -- bringing its total capacity at the beginning of 2015 to 1,449 MW.

In California, AltaGas also owns the Blythe Energy Center (507 MW), a natural gas-fired combined-cycle plant in Blythe, CA, that it purchased for $515 million in 2013.

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