An ArcLight Capital Partners affiliate — AL Blueway Holdings — has agreed to buy a 693-MW power plant in Middletown, Connecticut, from a Sojitz Corp. subsidiary, according to the private equity firm and a filing at the Federal Energy Regulatory Commission.
Terms of the deal are confidential, Boston-based ArcLight said Monday.
Power from the gas- and oil-fired, combined cycle Kleen Energy Systems power plant is delivered to Tenaska Power Services under a tolling agreement, ArcLight and Sojitz said in a FERC filing on Friday. It is subject to a “contract for differences” with Eversource’s Connecticut Light and Power utility subsidiary.
The Kleen power plant, one of New England’s most efficient gas-fired generators, benefits from stable cash flows under a capacity supply agreement with CL&P, according to ArcLight.
The transaction, expected to close in the fourth quarter, builds on ArcLight’s focus on the electrification “mega trend” and on supporting the energy transition, which the firm expects will include a mix of renewable resources and low-carbon power infrastructure, Daniel Revers, ArcLight founder and managing partner, said in a statement.
“The high-quality asset provides critical infrastructure and grid stability services as one of the core power suppliers in the New England market,” Revers said.
The planned transaction doesn’t raise market concerns and is in the public interest, ArcLight and Sojitz told FERC. They asked FERC to approve the deal by Oct. 10.
ArcLight affiliates own about 2,600 MW in ISO New England, according to the FERC filing.
Fitch Ratings on Thursday affirmed its BBB+ rating on $295 million in Kleen Energy Systems debt. A BBB rating indicates that Fitch’s expectations of default are low.
Kleen Energy Systems earns most of its revenue from a fixed-price capacity agreement with CL&P that lasts through the debt, which matures in 2025, according to the credit ratings agency.
The power plant’s owners also earn merchant revenue from selling all energy and a small share of uncontracted capacity into the ISO-NE wholesale markets, Fitch said.
“Kleen benefits from experienced operators and a generally stable historical operating profile, though it remains exposed to some cost risk as unscheduled maintenance must be met at an additional cost,” Fitch said.
The plant benefits from on-site oil storage, which would allow it to run at full capacity for 11 days, reducing risks from any temporary disruption to its natural gas supplies, Fitch said.