Austin Energy to Acquire Nacogdoches Biomass Facility

Austin Energy of Austin, Texas, has reached an agreement with Southern Power to acquire the Nacogdoches Generating Facility, a wood waste biomass-fueled power plant located near Sacul in Nacogdoches County, Texas, for $460 million.
Austin Energy to Acquire Nacogdoches Biomass Facility
Courtesy of Southern Power

The 115 MW plant consists of a bubbling fluidized-bed boiler, a condensing steam turbine generator with an evaporative cooling tower, wood fuel handling system and auxiliary support equipment. The plant is fueled with nonmerchantable wood biomass materials, including forest residue from the surrounding areas, pre-commercial thinnings, wood processing residues and clean municipal wood waste.

The plant commenced commercial operation in 2012 and currently provides 100 MW of renewable power to Austin Energy under a 20-year power purchase agreement. The transaction, which is expected to close in mid-2019, will allow Austin Energy to avoid approximately $275 million in additional costs over the remaining term of the agreement.

“Acquiring the biomass plant relieves our obligation to make escalating capacity payments to a third party and, over time, reduces the associated cost impacts to our customers,” said Jackie Sargent, Austin Energy’s General Manager. “This transaction is consistent with our efforts to manage our portfolio of generation resources in a responsible and cost-effective manner.”

While Austin Energy will take ownership of the plant, no immediate changes to the operation of the facility are expected, and its long-term status will be addressed in Austin Energy’s future resource planning efforts.

“Saving $275 million is a great result!” said Austin Mayor Steve Adler. “We’ve been working since I got into office to get a better financial deal around the biomass plant.”

Austin Energy has a target of offsetting 65 percent of its customers' energy needs with renewable resources by 2027. In 2018, wind, solar and biomass energy combined to offset 38 percent of the energy needed to serve Austin Energy’s customers.

JP Morgan is providing transaction support and Husch Blackwell is serving as outside legal counsel to Austin Energy in connection with the purchase.

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This article overlooks some important facts and MOs characterized the energy produced by this plant. many in CA, this biomass Plant has been inoperative most of the time it has been in service, because no one wants to pay 100’s of times the cost for wood burning energy, the technology of 100+ years ago. They bought the plant because buying a shuttered biomass plant was cheaper than paying for a shuttered biomass plant to be fully staffed, per the prior contract with Southern. Austin didn’t buy the plant because they still think it’s a good idea. It’s true that they have not said what they will do with it yet. Per the page below on Austin Energy’s website, “Austin Energy is purchasing all of the power produced by the plant over 20 years. The disproportionate expense of this organically-sourced energy, however, means that Austin Energy does not plan to invest additional dollars into biomass beyond the current contract.”