CONVENTIONAL POWER

Perennial Power Acquires Energy Cogeneration Plant in the Heart of Georgia

In the conventional power generation industry, SCOA through its subsidiary jointly owned with Sumitomo Corporation (SC), Perennial Power Holdings, Inc. (PPH), is focused on acquiring generation assets through acquisitions or by developing new power plants (green field). Perennial Power has the capabilities and resources to provide operation and management resources to the power plants. This combination has distinguished PPH from other investors in the power market.

PPH is a part of SC's global power generation portfolio of 5300 Megawatts.

Although the state of Georgia may evoke images of peaches, Perennial Power Holdings recently acquired a Georgia-based energy-producing entity that is helping us grow a more fruitful portfolio.

Attractive because of existing contracts and steady long-term revenue, Mid-Georgia Cogen in Kathleen, Georgia, was recently purchased by Perennial Power, a subsidiary of both SCOA and Sumitomo Corporation. Perennial Power purchased 100% ownership interests from Atlantic Power Corporation and Northern Star Generation, LLC in November of 2009.

Perennial Power currently owns, operates and manages power plants in North America and provides technical and advisory services to power generation projects in Sumitomo's global portfolio. Perennial Power has 570 megawatt (MW) net equity capacity in the U.S. and operates two of the facilities in its portfolio.

"Mid-Georgia facility is just the first of several acquisitions we hope to make in North America as we grow our portfolio," said Ken Kageyama, President of Perennial Power.

Mid-Georgia Cogen is a 300 MW dual-fuel, combined-cycle cogeneration project located in Kathleen, Georgia. The operation sells electricity under a long-term contract to Georgia Power Corporation until 2028 and sells steam under another long-term contract to the largest Frito-Lay snack foods plant in the United States. Perennial Power also assumed the operations and maintenance responsibilities of the facility and retained all employees of the facility.

“Mid-Georgia is a cogeneration facility, which means it produces two products,” explained Bill Cannon of Sumitomo Corporation of America. “Electricity is the primary output, and the other is steam, which is sold to the Frito-Lay plant there that produces about 10% of their domestic chip product, with the steam used as heat for cooking.”

“The plant uses natural gas and has a two-on-one set-up, which means that there are two turbines that feed into one steam turbine,” Cannon continued. “The turbines generate electricity and excess steam. That excess steam in turn generates even more electricity. The plant is a ‘peaker,’ which means it runs at times of peak energy demand in the region, so on extremely cold days and extremely hot days, depending on the season, it generates electricity on demand. We produce steam 24/7, but we produce electricity when called upon by Georgia Power.”

Naoki Murakata, former Senior Vice President of Perennial (now promoted to Director of Renewable Business, Sumitomo Corporation of America), said the acquisition is just part of a plan to reach an overall energy capacity for Perennial Power and her parent companies.

“SC as a whole has 5048 MW of capacity under its control, and 10 percent of that is here in the US,” Murakata said. “We are looking to be at the level of 6300 MW by the end of 2011. We will reach that objective either through the development of new assets, which takes time, or we acquire something that is up and running. We will most likely focus on acquisitions to meet that target because it’s much more difficult to achieve that goal through new development because of the long lead times.”

And, as part of SCOA’s current search for clean energy opportunities, Perennial Power is actively seeking to acquire clean burning natural gas and compliant modern coal generation in North America; SCOA recently entered the U.S. wind energy business with the purchase of an interest in the 120 MW Stanton wind farm in Martin County, Texas.

Kageyama added, “Our excellent Mid-Georgia facility acquisition integrates well into our global portfolio, and we look forward to the next opportunity."

PERENNIAL POWER HOLDINGS INCREASES STAKE IN HERMISTON GENERATING PLANT
September 2005

In the high desert of Eastern Oregon, nine miles south of the Columbia River, is the prototype for the bourgeoning Perennial Power business model.

There stands Hermiston Generating, a 474 Megawatt natural gas power plant that provides electricity to nearly 500,000 households in the Pacific Northwest. Perennial Power and SCOA bought a 25 percent stake in the Hermiston, Oregon plant in December of 2002 and increased their investment to 50 percent and became the operator in November of 2004.
It promises to be the first in a series of power plants Perennial Power, a subsidiary jointly owned by SCOA and Sumitomo Corporation, hope to acquire in the next few years as they shift their strategy from being passive investors to owners and operators of power generating plants.

Perennial Power Holdings (PPH)

Perennial Power Holdings is a SCOA subsidiary belonging to the Power and Telecom Business Unit, jointly owned with Sumitomo Corporation, and part of the worldwide portfolio of Sumitomo Corporation companies in the power generating business. This includes a diverse range of power generating projects in places like Turkey where they have a stake in the Birecik Hydro Power Project and the Phu Mu generating plant in Vietnam that SC helped build and is part owner.

Altogether, SC currently has 5330 Megawatts in their power generation portfolio and they hope to increase this to 6300 Megawatts by 2012. Perennial Power was specifically created by SCOA and SC to acquire assets in the U.S. energy industry by either buying existing plants or developing new power plants on their own (what it is called “green field” development).

Merchant vs. Contract Plants

There are two types of power plants: contract and merchant. Contract plants are often built after a utility agrees to buy the power generated by the plant at a fixed price for a specified duration of time. The Hermiston Generating Plant is a contract plant. The power generated is sold to the Portland based utility PacifiCorp, which owns the other 50 percent of the plant, under a long-term power sale agreement. PacifiCorp also has a long term contract to buy the natural gas needed to fuel the plant from a natural gas provider.

Merchant plants, of which a glut was built in the latest 1990s, sell their power on the spot market to utilities and their output and earnings are much more volatile. Because of this, Perennial Power will focus on the contract market.

Perennial Power is seeking to acquire natural gas and coal powered plants, although they are looking at renewable energy opportunities on a case-by-case basis.

Hermiston Generating Plant

While there are plans to buy more plants, Perennial Power is doing pretty well with their first purchase, the Hermiston Generating Plant.

Located in a veritable fertile crescent of power generation plants along the Columbia River Basin, the Hermiston plant was originally built by Bechtel in partnership with U.S. Generating in 1996 for $330 million.

Because of its recent construction it’s considered a high output, high reliability power plant that provides high and long term availability to PacifiCorp, who buys the power Hermiston generates. PacifiCorp actually controls the output of electricity from a nearby electrical sub-station and depends upon the plant, and offers bonuses, for reliable and efficient operations in the peak summer and winter months.

The Columbia River Basin is attractive to power generators because it’s close to the three main ingredients that are needed to produce power: natural gas, electrical grids and water. Hermiston Generating is just five miles from a major natural gas pipeline that runs from Canada to California and is in close proximity to major west coast electrical grids.

It is also close to the abundant waters of the Columbia River since the creation of electricity consumes a great deal of water. To heat the turbines and create steam gas, the Hermiston plant uses 2000 gallons a minute.

“It takes a lot of water, and a lot of natural gas,” explained Greg Cook, the plant manager at Hermiston.” But we produce electricity for about 500,000 households. That’s a lot of power.”

The plant also provides steam to a Lamb Weston potato plant located next door. Oregon recently surpassed Idaho as a top exporter of potato products and the Lamb Weston plant is an important customer, providing French fries to McDonald’s restaurants on the west coast.

Hermiston has a tight-knit and highly efficient crew of 23 employees that include technicians who also undertake maintenance duties.

“This is the best crew I’ve ever worked with in my 25 years in the business. They are great people and treat the plant as if it’s their own,” said Cook of Hermiston employees.

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