Capital Power Corp. and Manulife Investment Management said July 12 they have reached a deal to acquire the 1,633-MW Midland Cogeneration facility in Michigan for $894 million, including the assumption of $521 million of project level debt.
The plant, which according to S&P Global Market Intelligence data began operating in 1989, is majority-owned by Ontario pension plan investment adviser OMERS Infrastructure Management Inc. and several other partners, including Japanese firms.
Edmonton, Alberta-headquartered independent power producer Capital Power and asset manager Manulife Investment Management, on behalf of the Manulife Infrastructure Fund II and its affiliates, are equal venture partners and will each contribute approximately $186 million, subject to working capital and other closing adjustments, they said in a July 12 news release.
Capital Power will finance the deal using cash on hand and credit facilities. The company will also be responsible for operations and maintenance and asset management for a fee.
Midland is a natural gas-fired combined-cycle cogeneration facility. The plant has a 1,240-MW supply contract with local utility Consumers Energy Co., a subsidiary of CMS Energy Corp. through May 2030, and steam and electricity purchase agreements with Corteva Agriscience, a subsidiary of fertilizer maker Corteva Inc., and Dow Inc. subsidiary Dow Silicones Corp. to 2035.
The companies said approximately 15%, or 243 MW, of uncontracted capacity is available to sell into the Midcontinent ISO Zone 7 market. The site also has additional space for additional turbines, battery installation or a hybrid opportunity.
"The transaction provides immediate adjusted funds from operations accretion and is supported by highly contracted cash flows to 2030 and 2035 from long standing counterparties," Capital Power President and CEO Brian Vaasjo said in the news release.
Capital Power estimates average adjusted EBITDA of $59 million per year and an average AFFO of $35 million per year during the five-year period from 2023 to 2027.
"On the strength of the contracted cash flows from this acquisition, we are increasing our annual dividend growth guidance to 6% through 2025 from the previous 5%. Subject to board approval, this will include a 6% dividend increase for 2022 and represents our ninth consecutive year of dividend increases," Vaasjo said.
The transaction is expected to close in the third quarter of 2022, subject to regulatory approvals and other customary closing conditions.
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