The Tennessee Valley Authority (TVA) has secured $400 million in financing in order to acquire the Southaven Combined Cycle Plant, a natural gas-fueled power plant in Desoto County, MS.
The deal will give TVA sole ownership of the 774-megawatt natural gas facility near Memphis. TVA has operated the plant under a joint ownership since 2008 with Seven States Power Corp., a member-owned generation and transmission cooperative formed by local power companies served by TVA.
TVA will lease a 90% interest in Southaven to Southaven Combined Cycle Generation LLC, for which TVA will receive $400 million in proceeds. TVA will operate the plant under lease for 20 years, will continue to be responsible for all maintenance and fuel for the plant, and will receive all electricity generated from the plant to use in serving TVA customers.
"This lease financing provides TVA with a cost-effective way to pay for this long-term capital project as we continue to move toward a more diversified generation portfolio," said TVA CFO John Thomas said. "It also offers us greater financial flexibility and helps diversify our investor base."
Seven States will use proceeds from TVA's acquisition of its stake in Southaven to develop load management programs benefiting local power companies and TVA. "These customer-driven programs will help TVA and local power companies continue to provide reliable, low-cost, affordable power to Tennessee Valley customers," said Jack Simmons, Seven States Power Corp. president and CEO.
The financing consists of a $40 million equity investment and $360 million from the sale of senior notes, both of which are secured by TVA's rental payments.
TVA operates 11 high-efficiency, low-emission combined cycle gas-fueled units at five sites, including three units at Southaven, all of which TVA has built, leased or acquired since 2007.
In March 2011, TVA officials released a plan for the nation's largest public utility to shift away from reliance on coal-fired generation and move to natural gas and renewables (see Daily GPI, March 9, 2011).