Atlantic Power Corporation Announces Agreement to Acquire Partner Interests in Koma Kulshan Hydro Project
Atlantic Power Corporation announced that on June 29, 2018, it executed an agreement to acquire Covanta’s 50.00% interest in Koma Kulshan, a 13 megawatt run-of-the-river hydro project located north of Seattle, for $11.8 million. In addition, the Company will buy out the operation and maintenance (O&M) contract held by Covanta for $0.3 million. The transaction, which is not subject to any regulatory approvals, is expected to close in the third quarter of 2018. Upon closing of the transaction with Covanta, Atlantic Power will own 100% of the project and will become the project operator.
The Koma Kulshan project has been in commercial operation since October 1990. All of the output is sold to Puget Sound Energy under a Power Purchase Agreement (PPA) that runs through March 2037. The project has two FERC hydro licenses, both of which expire at the same time as the PPA. The project has no debt.
The Company’s existing 49.75% ownership interest in Koma Kulshan is held through a partnership. Earlier in June 2018, the Company acquired the 0.25% interest held by the managing general partner for $1.1 million. The acquisition eliminates the payment of management fees to the general partner going forward.
The total consideration of approximately $13.2 million represents a multiple of approximately 10 times the Company’s estimate of pro forma Project Adjusted EBITDA and approximately 11 times the Company’s estimate of pro forma cash distributions. Both estimates are based on average water conditions. The Company plans to fund the acquisition from discretionary cash.
“This is an important milestone for Atlantic Power as it marks the first external growth investment after a three-year business restructuring process,” said James J. Moore, Jr., President and CEO of Atlantic Power. “We view our hydro assets as having excellent near-term value and strong long-term prospects, so we are pleased to acquire the remaining interests in Koma Kulshan. By buying out the O&M and management contracts as well, we will have 100% ownership and operating control of a hydro project with a PPA that has a 19-year remaining term.”