The AES Corp. announced the closing of $2 billion in long-term, non-recourse financing for its 1,384 MW Southland repowering project in Southern California.
The financing consists of $1,475 million of senior secured notes amortizing through 2040 and a $492 million senior secured term loan amortizing through 2027, with a combined weighted average cost of debt of about 4.5 percent. AES will contribute about $350 million in equity to finance the balance of the total project cost of $2.3 billion.
“The $2.3 billion Southland repowering project is a key component of our strategic objective of increasing our U.S. dollar-based, long-term contracted position,” said AndrÃ©s Gluski, AES president and CEO. “This project will provide Californians with clean and reliable energy by integrating 1,284 MW of efficient combined cycle natural gas generation with 100 MW of advanced battery-based energy storage.”
“Without the support of our stakeholders, including the lenders and regulatory authorities in California, it would not have been possible for AES to achieve this significant milestone,” said Tom O’Flynn, AES executive vice president and chief financial officer. “This transaction is one of the first project financings for battery-based energy storage, demonstrating once again AES’ leadership in the energy storage industry.”
In 2014, under a competitive bidding process, AES was awarded 20-year power purchase agreements (PPAs) by Southern California Edison (SCE), to provide 1,284 MW of combined cycle gas-fired generation and 100 MW of four-hour duration, battery-based energy storage.
Under the PPAs, one hundred percent of the capacity will be sold to SCE in exchange for a fixed monthly capacity fee that covers fixed operating cost, debt service and return on capital. In addition, SCE will reimburse variable costs and provide the natural gas and charging electricity.
The gas-fired capacity will be constructed by Kiewit Power Constructors Co. (Kiewit) under fixed-price, date-certain, turnkey Engineering, Procurement and Construction contracts. Kiewit is one of North America’s largest engineering and construction contractors, with more than 130 years of experience delivering projects in various sectors, including extensive involvement in power-related projects.
Construction has already begun at AES’ Huntington Beach site and will be initiated at its Alamitos site in early July 2017. Commercial operation for the gas-fired capacity is expected in 2020 and for the energy storage capacity in 2021.
AES currently has a total of 3,941 MW of gas-fired capacity operating at its three Southland facilities: Alamitos (2,075 MW), Redondo Beach (1,392 MW) and Huntington Beach (474 MW). These facilities are expected to retire by the end of 2020. AES has also permitted 600 MW of additional capacity at Alamitos and Huntington Beach and is ready to respond to future solicitations if additional resources are needed in Southern California.