Footprint Power Secures Financing for Unusual NGCC in Massachusetts

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--A proposed gas-fired power plant with an unusual history will begin construction soon, now that it has secured financing. The Salem Harbor Power Station, a planned 674-megawatt (MW), natural gas combined-cycle (NGCC) generator in Salem, Massachusetts, secured $1 billion in financing in early January. The month before, the Federal Energy Regulatory Commission (FERC) granted the plant's developer, Footprint Power LLC (Bridgewater, New Jersey), an extra year to finish construction, citing nuisance lawsuits that delayed the start of construction.

Regulatory hurdles and challenges to line up financing are not unusual for power developers, particularly ones that are just starting out. What is unusual about the Salem Harbor Power Station is that the developer has agreed to lower the plant's carbon dioxide (CO2) emissions for each year it operates after 2025, to help the state comply with tough climate-change legislation passed in 2008. That law requires Massachusetts to lower CO2 emissions by at least 80% below 1990 levels by 2050.

To stay under its falling CO2 emissions cap, Footprint Power could limit the plant's hours of operations, install equipment to capture CO2 emissions or invest in renewable energy to offset the plant's CO2 emissions. The agreement to lower CO2 emissions becomes effective after 2025, less than a decade into the plant's operating life. And, as part of a legal settlement agreement with environmental organizations, Footprint Power agreed to tear the plant down in 2049, after only 33 years of operation.

Jonathan Peress, a vice president of the Conservation Law Foundation (Boston, Massachusetts), told The New York Times the agreement with Footprint Power to progressively lower its CO2 emissions is a first-of-its-kind deal.

"We want gas to continue to displace coal," he said. "We just don't want to worry that we're going from heroin to methadone."

"We are thrilled to be starting off the new year by achieving this latest and most important milestone," said Scott Silverstein, Footprint's president and chief operating officer, after closing financing. "We want to especially thank Salem Mayor Kim Driscoll, former state Rep. John Keenan, Sen. Joan Lovely, the Salem City Council and Salem's residents and business community for their overwhelming and unwavering support. Their advocacy and engagement helped, and continues to help, make this project better."

Iberdrola Engineering & Construction (San Diego, California), a unit of Spanish energy giant Iberdrola S.A. (MCE:IBE) (Bilbao, Spain), will provide engineering, procurement and construction (EPC) services to the Salem Harbor plant. It will be built on the site of a 60-year-old, coal-fired generator that is in the process of being demolished.

Footprint Power bought the coal plant from Dominion Resources Incorporated (NYSE:D) (Richmond, Virginia) in 2012. Construction on the new power plant will begin this spring, and it is scheduled to be operating by mid-2017.

"Salem Harbor is not only Footprint's first project, it also came into being at about the same time that Footprint itself did," the company said on its website. "We identified Salem Harbor as the right place to implement our business plan on our very first official scouting trip back in February 2010. Salem Harbor topped our list based on its strong infrastructure (deepwater port access, proximity to interstate natural gas line and transmission headroom, among other things), the presence of an owner with a strategic outlook that did not value this asset and the level of engagement of the community."

"The construction of the new Salem Harbor Station brings with it a wealth of benefits, creating an environmentally friendly and critically needed source of energy and capacity within Massachusetts and New England," said Andrew Nevin, whose firm helped arrange financing for Salem Harbor.

"New England has been closing older, coal- and oil-fired generation to comply with tougher environmental regulations," said Brock Ramey, Industrial Info's North American power advisor. "But construction of replacement generation capacity has been complicated by a dearth of gas pipeline capacity into the region. Last year's polar vortex drove up prices for gas-fired generators in the region, forcing some interruptible industrial gas users to be curtailed so that essential loads--like homes--could be served. Footprint Power's taking a very different approach to the power business, and we'll be watching to see how it turns out."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.