CIRI has become one of the major investors in a large natural gas-fired, combined cycle power plant in Ohio that has been under development for several years and has now reached financial close. The plant will serve the largest wholesale power market in the world, known as the PJM (Pennsylvania-New Jersey- Maryland) Interconnection. Despite its name, the PJM Interconnection actually encompasses 13 states in the upper Midwest.
Through its wholly-owned subsidiary, CIRI Energy, CIRI joins Capital Dynamics and Guggenheim Partners as an equity sponsor in the Middletown Energy Center. The plant, based in Middletown, Ohio, is expected to cost around $500 million to build, with construction to be completed in 2018.
Nearly 40 percent of the PJM Interconnection’s electricity-generating capacity comes from coal-fired power plants. Low natural gas prices and stricter emissions standards are making these coal-fired plants uncompetitive and forcing many of them to shut down.
“Once it’s up and running, the Middletown project will be one of the most competitive plants in the region and will produce the kind of clean, efficient power that the PJM will need in the coming decades,” said Stig Colberg, Chief Financial Officer at CIRI.
CIRI’s equity stake in the project is $40 million and will help diversify CIRI’s energy portfolio. Currently, many of the company’s energy infrastructure investments are in the wind sector, such as Fire Island Wind, Capistrano Wind Partners and Palouse Wind. The Middletown investment will also elevate CIRI’s reputation in the industry as a substantial investor in significant projects and transactions.
“Middletown is an important project, and it will do a fair amount to further establish CIRI as a capable and reliable partner for substantial and, sometimes, sophisticated projects,” Colberg said. “We have been looking for opportunities to both diversify the company’s portfolio of energy assets and continue to build CIRI Energy’s bench strength as far as our ability to develop and manage projects. This will help do both.”
The Middletown project will earn revenues from the sale of power generation capacity, which are essentially payments for being available to deliver power into the PJM, as well as from the sale of power itself. Even though construction has only just begun, the Middletown plant has already participated in the PJM capacity auction for the twelve-month period beginning in mid-2018, which will be its first year of operation. Capacity prices for 2018/2019 cleared at nearly fifty percent above the levels anticipated by project backers.