FirstEnergy Corp. (NYSE: FE) and American Municipal Power, Inc. (AMP) have entered into a non-binding memorandum of understanding (MOU) to site, build and operate a natural gas-fired peaking facility located on the grounds of FirstEnergy's existing coal-fired Eastlake Plant in Eastlake, Ohio. The proposed project is subject to regulatory approval.
As part of the non-binding MOU, FirstEnergy would supervise construction of the four combustion turbine units that are capable of producing 873 megawatts (MW). AMP will provide the construction financing and own 75 percent of the generation output upon completion, while FirstEnergy will fund and own the remaining 25 percent of the output in 2016. Plans call for the facility to be operational in early 2016.
Adding new generation is expected to reduce or extend the timeframe for some of the previously announced transmission projects planned by FirstEnergy by alternatively addressing reliability concerns resulting from power plants being deactivated in the region due to new U.S. Environmental Protection Agency rules.
"This project is expected to reduce our estimated transmission spending for projects related to plant deactivations by about $200 million through 2016," said Mark T. Clark, executive vice president and chief financial officer, FirstEnergy. "Our estimated transmission spend could then be in the $500 to $700 million range, with approximately $150 million of that total to be incurred in 2013."
Plant construction is expected to begin in the latter half of 2014 and will take approximately 15 – 20 months to complete. It is expected that up to 150 temporary construction jobs will be created for this project.
FirstEnergy's Eastlake Plant was selected for the new combustion turbines due to its existing transmission system interconnections and the fact it is located in a region that could be impacted by the deactivation of older power plants. Earlier this year, FirstEnergy announced that nine older, coal-fired power plants, including the Eastlake Plant, would be deactivated as a result of the U.S. Environmental Protection Agency's new Mercury and Air Toxics Standards (MATS) and other environmental regulations.