Gas Plant Agreement Advances Utility Toward Cleaner, More Diverse Fleet

Future plant addition will also save ratepayer dollars and support area economy

News provided by

Mar 12, 2012, 05:56 ET

SAN ANTONIO, March 12, 2012 /PRNewswire/ -- In an era of increasing environmental regulations, CPS Energy is one of the first utilities in the nation to make a proactive transition from older coal-fired power to a much cleaner natural gas-fired power. President and CEO Doyle Beneby announced that the San Antonio utility has entered into an agreement to purchase an existing natural gas plant, supporting its strategy of diversification and risk management and allowing customers to continue to benefit from a generation portfolio that is heavily weighted in low-cost, cleaner traditional resources.

(Logo: http://photos.prnewswire.com/prnh/20110620/DA22969LOGO)

Rio Nogales, located in Seguin, Texas, is an 800 megawatt (MW) combined-cycle gas plant that will replace the energy output of J.T. Deely, a two-unit coal plant, planned to come offline in 2018. Purchasing the plant allows CPS Energy to avoid a minimum of $1 billion in costs that would have been required to keep Deely, the utility's oldest coal plant, operational and compliant with expected environmental regulations.

"This agreement is a short- and long-term win for our ratepayers and the South Texas economy, as well as our community's air quality," said Beneby. "We are avoiding the continuous costs of environmental retrofits to Deely, starting with a $565 million scrubber. This investment is in power that does not emit particulate matter or sulfur dioxide and supports abundant natural gas resources in Texas, rather than coal from Wyoming."

"Gas is a cleaner fuel and there is plenty of it in the ground in Texas. CPS Energy's purchase of an existing plant is a smart move for its ratepayers and the timing could not be more right," said Dave McCurdy, president and CEO of the American Gas Association.

In comparison to the Deely Power Plant, a natural gas combined-cycle plant:

uses approximately one-half the water;
emits approximately one-half the carbon dioxide;
emits approximately one-third of the ozone-forming nitrogen oxide emissions;
has virtually no sulfur dioxide, mercury, and particulate matter emissions;
and, has no ash by-product to dispose of, reducing recycling efforts.

Rio Nogales is currently owned by a Tenaska Capital Management, LLC, affiliate, which has entered into a purchase and sale agreement with CPS Energy, capping the utility's eight-month process to identify additional natural gas resources. The 10-year old plant is expected to be operational for the next 30 to 40 years.

Purchase of the plant is expected to be finalized in early April. Rio Nogales' current employees (approximately 30) will be offered employment with CPS Energy which will become effective at the closing of the acquisition.

CPS Energy is the nation's largest municipally owned natural gas and electric utility, providing service to approximately 717,000 electric customers and 325,000 natural gas customers in and around the City of San Antonio. The utility ranks among the nation's lowest-cost energy providers while ranking number 1 in wind-energy capacity among municipally owned utilities. For more information, visit www.cpsenergy.com.

About Tenaska Capital Management, LLC

Tenaska Capital Management, LLC (TCM) is an affiliate of Omaha, Nebraska-based Tenaska, one of the largest independent power producers in the United States. TCM is a leading private equity firm focused on investments in the power and energy sectors in North America. Formed in 2002, TCM has assets under management of approximately $4 billion.

SOURCE CPS Energy