CEDAR RAPIDS, Iowa, August 1, 2005 (PRNewswire-FirstCall) — Interstate Power and Light Co. (IP&L), the Iowa utility subsidiary of Alliant Energy Corporation, filed a joint application with the Iowa Utilities Board (IUB) for approval of its sale agreement with FPL Energy, LLC, a subsidiary of FPL Group, Inc. to sell the company’s 70 percent ownership interest in the 598-megawatt Duane Arnold Energy Center (DAEC), a nuclear generating facility located near Palo, Iowa.
Pending various regulatory approvals, including the Iowa Utilities Board (IUB), the Illinois Commerce Commission (ICC), Minnesota Public Utilities Commission (MPUC), Wisconsin Public Service Commission (PSCW), Federal Energy Regulatory Commission (FERC), Nuclear Regulatory Commission (NRC) and the satisfaction of other closing conditions, the transaction is expected to be completed by the first quarter of 2006.
As part of the sale agreement, announced by IP&L on July 5, FPL Energy agreed to purchase the nuclear generating facility, nuclear fuel and inventory for approximately $380 million. In addition, the agreement considers that affiliates of IP&L will sell other related assets to FPL Energy for an additional $7 million.
The purchase price for the DAEC is subject to various adjustments at closing. In conjunction with the sale agreement, at closing FPL Energy will offer employment to all current Nuclear Management Company employees at the DAEC.
The Power Purchase Agreement between FPL Energy and IP&L was a component of the filing made with the IUB. In general, the pricing was formulated to mirror the expected costs of continued ownership by IP&L. The fixed monthly capacity payment in the long-term contract corresponds to IP&L’s projected revenue requirement, collected in rates, had IP&L continued to own the facility. This fixed payment would continue to be reflected in base rates. The monthly variable payment to FPL Energy varies directly with the amount of energy delivered to IP&L, which is based on a target capacity factor of 90 percent. The energy charge would be passed through to IP&L’s customers via the monthly Energy Adjustment Clause (EAC), as is currently the case.
If in a given month, FPL Energy delivers less than the energy amount corresponding to the 90 percent capacity factor, there will be a reduction in the energy payment to reflect the lower fuel consumption as well as a corresponding adjustment in the capacity payment to FPL Energy to proportionally compensate IP&L for the under-delivery. This will ultimately result in a reduction in the DAEC component of the EAC cost for customers. The converse is also true if the delivered energy exceeds the target amount.
Through the sale of DAEC, IP&L reduces its operational risk associated with owning a nuclear power plant, yet the long-term contract with FPL Energy allows IP&L to retain competitively priced nuclear energy in its portfolio. If DAEC is off-line for a planned or forced outage, FPL Energy does not have the obligation to provide replacement energy to IP&L, but will proportionally affect their PPA revenue stream should they choose not to. The PPA prices are fixed for the term of the contract and cannot be adjusted.
The sale agreement considers that, at closing, IP&L will transfer the assets of the decommissioning funds to FPL Energy, who will be responsible for IP&L’s portion of the costs for decommissioning the facility.
“Our company is committed to working with state and federal regulators to resolve the various regulatory issues associated with our sale agreement with FPL Energy,” states Tom Aller, President-IP&L. “We are confident that our state and federal regulators will determine that the sale agreement balances the long-term best interests of our customers, shareowners and our IP&L service area.”
In December 2004, IP&L announced its intent to sell the company’s ownership interest in the DAEC, contending that a sale would reduce customer and shareowner financial and operational uncertainty associated with nuclear generating facility ownership and operations. At this time, the company anticipates net proceeds from the asset sale will be available for general corporate purposes and debt retirement.
Two other entities, Central Iowa Power Cooperative and Corn Belt Power Cooperative, own the remaining 30 percent interest in DAEC. The regulatory approval process and decisions are independent of any future actions by the other DAEC owners.
About Alliant Energy [ www.alliantenergy.com ]
Alliant Energy Corporation is an energy-services provider with subsidiaries serving more than three million customers. Providing its customers in the Midwest with regulated electricity and natural gas service remains the company’s primary focus. Interstate Power and Light, the company’s Iowa utility subsidiary, serves 535,000 electric and 238,000 natural gas customers. Other business platforms include the international energy market and non-regulated domestic generation. Alliant Energy, headquartered in Madison, Wis., is a Fortune 1000 company traded on the New York Stock Exchange under the symbol LNT.