Tenaska Enters Renewable Power Industry with California Projects

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Independent power developer Tenaska Incorporated (Omaha, Nebraska) has made its first foray into renewable energy development, and the company has big plans for the future.

Last month Tenaska's renewable energy unit, Tenaska Solar Ventures LLC, closed financing for the 130-megawatt (MW) Imperial Solar Energy Center South project in Imperial County, California. The photovoltaic (PV) project, which began construction last December, has a total investment value (TIV) of $416 million. When operating in 2014, the plant's output will be sold to San Diego Gas & Electric (SDG&E) (San Diego, California), a unit of Sempra Energy (NYSE:SRE) (San Diego). First Solar Incorporated (NASDAQ:FSLR) (Tempe, Arizona) will provide thin-film PV modules and engineering, procurement and construction (EPC) services for the project.

The Tenaska unit also is developing a second, larger PV project close to the first one. This project, the Imperial Solar Energy Center West, is scheduled to be a 150-MW project with a TIV of $500 million. Tenaska hopes to kick off construction on this second project in late 2012 and bring it online by late 2014.

"For 25 years, Tenaska has been a developer and operator of electric generating plants fueled by natural gas," Tenaska Development President Dave Fiorelli said in a statement. "We're leveraging this experience to expand into solar generation, and we expect to play a significant role in the solar energy industry."

Since its founding in 1987, Tenaska has developed more than 9,000 MW of generating capacity. It manages and operates eight power plants totaling more than 6,700 MW that it owns in partnership with other companies. Privately held Tenaska reported gross operating revenues of $9.3 billion in 2011.

Commenting on the financial close on the Imperial Solar Energy Center South project, David Kirkwood, Tenaska vice president and treasurer, said in a statement: "This financing recognizes Tenaska's consistent approach to rational projects, underpinned by strong contracts and appropriately structured debt. We are proud to have teamed with an outstanding group of lenders whose professionalism and commitment to the deal were especially important in today's challenging financing environment." A consortium of nine banks provided debt financing to that project.

In that April 9 statement, Tenaska said the South project represents "the first of what is expected to be a number of solar generating stations the company will develop in California and other states."

Why solar and why now? Tenaska declined Industrial Info's request for an interview, so it is not clear why the company is adding solar power to its capabilities or where projects after the Imperial South and West projects might be located.

Unlike wind power, solar generation is not eligible for a federal production tax credits, and the expiration of the Section 1603 grants for renewable energy has slowed solar power development. But Tenaska's Imperial County projects should be eligible for a federal investment tax credit of 30%, providing they are online by the end of 2016.

Electricity from Tenaska's South project will be transmitted to SDG&E over the utility's PowerLink Sunrise transmission line, a 150-mile, $1.9 billion, 500-kilovolt (kV) project that is under construction. SDG&E has made significant progress toward meeting California's mandate that renewable energy account for 33% of electricity generated by 2020. At yearend 2011, about 20% of the utility's electricity came from renewable sources, SDG&E said. For more on SDG&E's growing portfolio of renewable resources, see March 23, 2012, article - San Diego Gas & Electric Inks 300 Megawatts of Renewable Energy Contracts.

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