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Avenue Capital Group seeks to buy 6 peaking units in California

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Avenue Capital Group seeks to buy 6 peaking units in California

An Avenue Capital Group LLC subsidiary told the Federal Energy Regulatory Commission it wants to buy six natural gas-fired peaking facilities with combined capacity of 403 MW in California from the Carlyle Group LP.

The acquisition would push Avenue's gas-fired capacity in California to 1,669 MW, and its total capacity in the state to 1,910 MW.

According to the Dec. 31, 2018, application to FERC (Docket No. EC19-43), Avenue is seeking to buy the Border CT, CalPeak Power Enterprise Peaker Plant, Panoche CT and Vaca Dixon CT facilities from a Cogentrix holding company, CalPeak Power LLC, for an undisclosed sum. Each of the four facilities has a summer capacity of 48 MW, according to the application.

The Panoche and Vaca Dixon facilities are interconnected with transmission facilities owned and controlled by Pacific Gas and Electric Co., while the Border and Enterprise peakers are interconnected with San Diego Gas & Electric Co. transmission facilities.

Avenue also wants to buy the 111.2-MW gas-fired Starwood-Midway peaker in Fresno County, Calif., from Cogentrix unit Midway Peaking, which is interconnected with transmission facilities owned and controlled by PG&E.

It is also aiming to acquire the 96-MW Malaga Power facility, also in Fresno County, and also connected with the PG&E transmission system. This plant is referred to by S&P Global Market Intelligence as Kings River CT. Cogentrix acquired it in 2015.

Study finds peakers are aging

The California ISO market has just over 68 GW of installed capacity, with a March 2018 report by the U.S. National Renewable Energy Laboratory putting the installed peaking capacity in the state at 20.8 GW. NREL said about 12 GW of the peaking capacity is at least 40 years of age.

"Assuming the existing generation fleet has the same retirement characteristics as the historic fleet, we would expect about 13 GW of peaking capacity in California to retire over the next 20 years, based only on age," the NREL said in its report.

The assets that Avenue Energy wants to buy, the oldest of which began operating in 2001, will be placed with a wholly owned subsidiary called Middle River Power IV, which will be controlled by Marc Lasry and Sonia Gardner, the Avenue Energy managers who founded the company in 1995.

According to the FERC filing, Middle River Power operates the 743-MW, gas-fired High Desert Power Project in San Bernardino County, Calif., which it acquired in April 2016.

Another Avenue entity, MRP San Joaquin, acquired three California peakers with 523 MW of combined capacity from AltaGas Ltd. in a deal that was announced in September 2018 and completed in November. (EC18-159)

In its filing, Avenue said its 1,910 MW of capacity in California will represent 2.8% of the ISO market.

Jeffrey Ryser is a reporter for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.