DEDHAM, Mass., Aug. 1, 2017 /CNW/ -- Atlantic Power Corporation
(NYSE: AT) (TSX: ATP) ("Atlantic Power" or the "Company") announced
today new seven-year Power Purchase Tolling Agreements ("PPTAs")
for two of its power projects in San
Diego, the Naval Station project located on Naval Base San
Diego, in the amount of 48 megawatts (MW), and the North Island
project located on Naval Base Coronado, in the amount of 38.6
MW. Both PPTAs are with San Diego Gas & Electric Company
("SDG&E"), the existing power customer for the two
projects. The PPTAs are subject to certain significant
conditions or approvals, as described below. If these
conditions are met, delivery obligations under the PPTAs would
commence as early as February 2018.
"We are pleased to have reached agreement with SDG&E on new
contractual arrangements for our Naval Station and North Island
projects. These agreements represent an important milestone
in our effort to extend operation of these facilities," said
Joe Cofelice, Executive Vice
President, Commercial Development. "In a market where
gas-fired generation is under economic pressure, the PPTAs offer us
an attractive return on the incremental investment that we expect
to make in the projects, which we believe have long-term value as
sources of flexible generation in the San
Diego load pocket."
Mr. Cofelice continued, "In late May, we submitted detailed
proposals in the second round of the solicitation under which the
U.S. Navy is seeking to address its need for energy security and
resiliency at the two naval bases. In addition to the
approval of the California Public Utilities Commission, a positive
outcome in this solicitation is required for the Company to proceed
under the new PPTAs."
Background on Existing Contractual Arrangements
The Company's Naval Station, North Island and Naval Training
Center ("NTC") projects sell power to SDG&E under Power
Purchase Agreements that are scheduled to expire in December 2019 (the "Existing PPAs"). In
addition, all three projects supply steam to the U.S. Navy under
agreements that provide the Company with the right to use the
property at the respective sites on which each project is located
(the "Navy agreements"). The Navy agreements are scheduled to
expire in February 2018.
The Navy, which does not expect to have a need for steam from
these projects after the Navy agreements expire, initiated a
solicitation in early March for proposals to provide energy
security and resiliency using the existing sites at Naval Base San
Diego and Naval Base Coronado. In late May, the Company
submitted detailed proposals for both sites in the second phase of
the three-phase solicitation. If successful in this process,
the Company would retain continued use of the two sites beyond
February 2018 ("site
control").
Conditions Precedent
The new PPTAs are subject to certain significant conditions,
including obtaining the approval of the California Public Utilities
Commission ("CPUC") and retaining site control. CPUC approval
could take approximately four months or longer. The timeframe
for the Navy process is undetermined.
Termination of the Existing PPAs
The Company and SDG&E have executed amendments to the
Existing PPAs for all three projects, which provide for termination
of the Existing PPAs as early as February
2018, coincident with the expiration of the Navy
agreements. These amendments to the Existing PPAs are also
subject to CPUC approval.
Resource Adequacy Contracts
The Company and SDG&E also have entered into Resource
Adequacy ("RA") contracts for Naval Station and North Island, which
are subject to CPUC approval and are conditioned upon the Company
retaining site control beyond February 2018. The RA contracts
for Naval Station and North Island are contingent arrangements that
would become effective only under limited circumstances and
conditions. In addition, the Company and SDG&E have
entered into an RA contract for NTC, under which NTC would supply
RA capacity to SDG&E from February through December 2018.
This RA contract is also subject to CPUC approval and is
conditioned upon retaining site control; however, the NTC project
is not included in the Navy's solicitation for the other two sites
and thus the process for retaining control of the NTC site is
undetermined.
Financial Implications
The Company expects approximately $16
million of Project Adjusted EBITDA from Naval Station and
North Island on a combined basis in 2017. Power prices and
interest rates are significantly lower now than at the time the
Existing PPAs were originally executed in the mid-1980s. In
addition, the incremental investment required to meet the
requirements of the PPTAs is much less than the original
investment. For these reasons, the Project Adjusted EBITDA of
the two projects under the PPTAs is expected to be approximately
$6 million annually on a combined
basis, beginning in February 2018. In conjunction with the
new PPTAs, the Company expects to make investments in both projects
in the form of major maintenance and upgrades, primarily in
2018.
The NTC project, which has a capacity of 25 MW, is expected to
generate approximately $4 million of
Project Adjusted EBITDA in 2017. The Company is continuing to
pursue contractual arrangements for the project for 2019 and
beyond. If successful in arranging new contracts and meeting
the necessary conditions, the Company expects the resulting Project
Adjusted EBITDA for NTC would be significantly lower than the 2017
level.
About Atlantic Power
Atlantic Power owns and operates a diverse fleet of twenty-three
power generation assets across nine states in the United States and two provinces in
Canada. The Company's power generation projects sell
electricity to utilities and other large commercial customers
largely under long-term power purchase agreements, which seek to
minimize exposure to changes in commodity prices. The
aggregate gross electric generation capacity of this portfolio is
approximately 2,138 MW, and the Company's aggregate net ownership
interest is approximately 1,500 MW. Nineteen of the projects
are currently operational, totaling 1,975 MW on a gross capacity
basis and 1,337 MW on a net ownership basis. The remaining
four projects, all in Ontario, are
not operational, three due to revised contractual arrangements with
the offtaker and the other, Tunis,
has a forward-starting 15-year contractual agreement that will
commence between November 2017 and
June 2019.
Atlantic Power's shares trade on the New York Stock Exchange
under the symbol AT and on the Toronto Stock Exchange under the
symbol ATP. For more information, please visit the Company's
website at www.atlanticpower.com or contact:
Atlantic Power Corporation
Investor Relations
(617) 977-2700
info@atlanticpower.com
Copies of the Company's financial data and other publicly filed
documents are available on SEDAR at www.sedar.com or on EDGAR at
www.sec.gov/edgar.shtml under "Atlantic Power Corporation" or on
the Company's website.
************************************************************************************************************************Cautionary
Note Regarding Forward-Looking Statements
To the extent any statements made in this news release contain
information that is not historical, these statements are
forward-looking statements within the meaning of Section 27A of the
U.S. Securities Act of 1933, as amended, and Section 21E of the
U.S. Securities Exchange Act of 1934, as amended, and under
Canadian securities law (collectively, "forward-looking
statements").
Certain statements in this news release may constitute
"forward-looking statements", which reflect the expectations of
management regarding the future growth, results of operations,
performance and business prospects and opportunities of the Company
and its projects. These statements, which are based on
certain assumptions and describe the Company's future plans,
strategies and expectations, can generally be identified by the use
of the words "may," "will," "project," "continue," "believe,"
"intend," "anticipate," "expect" or similar expressions that are
predictions of or indicate future events or trends and which do not
relate solely to present or historical matters. Examples of
such statements in this press release include, but are not limited,
to statements with respect to the following:
- the Company's belief that Naval Station and North Island
represent valuable sources of flexible generation for the long
term;
- the Company's ability to achieve a successful outcome in the
Navy solicitation and retain site control at Naval Station and
North Island beyond February
2018;
- the Company's ability to satisfy certain conditions relating to
the PPTAs and amendments to the Existing PPAs, including obtaining
the approval of the CPUC;
- the Company's expectation with respect to the timing of CPUC
approval;
- the Company's expectations with respect to the level of Project
Adjusted EBITDA that Naval Station, North Island and NTC will
generate in 2017;
- the Company's expectations with respect to the level of Project
Adjusted EBITDA that Naval Station and North Island may
generate under the PPTAs; and
- the Company's ability to retain site control at NTC and its
views with respect to the outlook for NTC beyond the February 2018 early termination of its PPA.
Forward-looking statements involve significant risks and
uncertainties, should not be read as guarantees of future
performance or results, and will not necessarily be accurate
indications of whether or not or the times at or by which such
performance or results will be achieved. Please refer to the
factors discussed under "Risk Factors" and "Forward-Looking
Information" in the Company's periodic reports as filed with the
Securities and Exchange Commission from time to time for a detailed
discussion of the risks and uncertainties affecting the Company,
including, without limitation, Company's ability to achieve a
successful outcome in the Navy solicitation and its ability to
satisfy the other conditions to the PPTAs, including the approval
by the CPUC; the Company's ability to generate revenue from
projects with PPAs expiring in the next several years, and the
outcome or impact on the Company's business of any such
actions. Although the forward-looking statements contained in
this news release are based upon what are believed to be reasonable
assumptions, investors cannot be assured that actual results will
be consistent with these forward-looking statements, and the
differences may be material. These forward-looking statements
are made as of the date of this news release and, except as
expressly required by applicable law, the Company assumes no
obligation to update or revise them to reflect new events or
circumstances. The Company's ability to achieve its
longer-term goals, including those described in this news release,
is based on significant assumptions relating to and including,
among other things, the general conditions of the markets in which
it operates, revenues, internal and external growth opportunities,
and general financial market and interest rate conditions.
The Company's actual results may differ, possibly materially and
adversely, from these goals.
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SOURCE Atlantic Power Corporation