AMP, FirstEnergy sign MOU for 707MW CCGT facility in Ohio

Source: American Municipal Power, Inc. and FirstEnergy Corp.

FirstEnergy Corp. (NYSE: FE) announced that it has entered into a non-binding Memorandum of Understanding (MOU) for the sale of its Fremont Energy Center in Fremont, Ohio, to American Municipal Power, Inc. (AMP). The MOU provides, among other things, for the parties to engage in exclusive negotiations toward AMP executing a definitive agreement by March 11, 2011, to purchase the facility on or about July 1, 2011.

The Fremont Energy Center, a 707-megawatt (MW) natural gas combined cycle generation plant owned by FirstEnergy subsidiary, FirstEnergy Generation Corp., is currently under construction and scheduled to be complete in 2011. The plant includes two natural gas turbines and a steam turbine capable of producing 544 MW of load following capacity and 163 MW of peaking capacity.

FirstEnergy acquired the partially complete plant in January 2008 from Calpine Corporation in that company’s bankruptcy proceeding. The sale of Fremont to AMP is consistent with FirstEnergy’s current efforts to divest non-strategic assets and use the proceeds to provide the company with additional financial strength and flexibility.

The Fremont Energy Center fits well with AMP’s overall power supply strategy of reducing its members’ long-term reliance on wholesale power markets through development of diverse generation assets. AMP members presently rely on the wholesale market for more than 90 percent of their intermediate power supply needs. Based on AMP members’ long-term power supply analysis conducted by R.W. Beck (an SAIC company), the Fremont facility would provide a cost-effective, environmentally friendly, asset-based alternative to wholesale energy and capacity markets.

Analysis indicates that when compared to natural gas combined cycle alternatives, the Fremont facility would provide a $350 million savings to participating AMP members over 30 years, as well as a favorable energy market location and fuel supply optionality. Also important to AMP members is the mitigation of construction and permitting risks by acquiring a facility that is largely complete.

In late 2010, AMP announced its intent to develop a natural gas combined cycle facility on land in Meigs County that was formerly the site for a proposed coal-fired facility known as the American Municipal Power Generating Station (AMPGS). Those plans have been suspended based on the new developments with the Fremont facility.

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