Spanish Utility Group’s First Such Acquisition in United States

IBERDROLA AGREES TO BUY OREGON COGENERATION UNIT FOR €209 MILLION

• It will acquire the 506 MW plant in Klamath Falls through its U.S. subsidiary PPM Energy, which has operated the unit since it went on stream in 2001
   
• The transaction, which will close this autumn subject to regulatory approvals, involves the amortization of municipal bonds issued to finance the building of the plant

IBERDROLA, through its U.S. subsidiary PPM Energy, has signed an agreement with the city of Klamath Falls in southern Oregon to buy its 506 MW cogeneration plant for €209 million ($290 million).

The agreement to buy IBERDROLA’s first energy plant of these characteristics in the United States came after several months’ negotiations between PPM Energy and the city. PPM Energy has operated the plant under a commercial contract with Klamath Falls since it went on stream in 2001.

The city of Klamath Falls had been evaluating different alternatives following the expiration of two power sales contracts, that left a portion of the plant’s output unsold. It selected the IBERDROLA subsidiary for its experience operating the plant and its knowledge of regional energy markets.

Under the agreement, PPM Energy will pay off all the outstanding municipal bonds issued to finance the building of the plant, and will assume full control of energy production. Under its operating and maintenance contract, PPM Energy has already been buying 237 MW of capacity to supply major customers in California and the Pacific Northwest. The Oregon-based company already owns a gas-cycle plant, with a 100 MW capacity, adjoining the cogeneration facility.

When the sale closes this autumn, following receipt of regulatory permits, the city of Klamath Falls will continue to supply the plant with treated municipal wastewater for cooling, an innovative process that substantially reduces the city’s discharge to the Klamath River. PPM will take over other contracts to supply co-generated steam to a nearby wood products manufacturing facility and about 80 MW of long-term power sales.

Peter van Alderwerelt, PPM senior vice president, said “PPM’s acquisition of Klamath puts the plant on a firm financial footing for the future. It enables us to fully place Klamath into our portfolio of gas and wind plants to serve our utility customers in the Northwest and California and gives us the potential to use Klamath transmission to help move wind power to high-value markets”.

Meanwhile, Klamath Falls Mayor Todd Kellstrom termed the sale “a positive outcome for the city”, adding that “the community realized economic development benefits from construction of the plant, and we can now turn it over to a company that will retain 23 good jobs and has a history as an active community supporter”.

In a separate development, and for the purpose of unifying IBERDROLA’s wind power businesses in the United States, the Board of PPM has named Martín Múgica, who is head of IBERDROLA’s renewables businesses in the United States, as PPM’s Senior Vice President of Renewable Energy. It also appointed Pablo Canales, who is head of finance of IBERDROLA’s renewables businesses in the U.S., as Senior Vice President and CFO of PPM.

PPM, a leading renewable energy producer

At the end of June this year, PPM Energy had 1,741 megawatts (MW) of wind energy in operation (including 606 MW provided under Power Purchase Agreements from third parties (PPA).

PPM Energy sells most of its production to large U.S. customers, via long-term contracts. They include the cities of Seattle, Sacramento, Eugene, Pasadena and Anaheim, as well as investor-owned utilities such as Xcel Energy and Pacific Gas & Electric Company and the federal Bonneville Power Administration.

PPM Energy provides operating and maintenance services, and recently announced plans to develop wind power projects in Canada.