Koch Industries unit to buy Texas power plant

Reuters

By Eileen O'Grady

HOUSTON, Oct 8 (Reuters) - A Koch Energy Services LLC unitwill buy a natural gas-fired power plant in Texas, the companysaid on Tuesday, confirming that the purchase of the1,055-megawatt Odessa Power plant from an affiliate of EnergyCapital Partners LLC will be the Koch unit's first foray intothe power generation market.

Koch Energy Services itself is a unit of Koch Industries Inc, of the largest privately held companies in theUnited States. The plant is near the Permian Basin of West Texaswhere energy companies tapping into tight deposits of oil andgas have a growing and voracious appetite for electricity.

Koch Industries is a closely held company that does notreveal much information about its many subsidiaries.

The deal comes with some element of regulatory risk as theTexas Public Utility Commission (PUC) and the grid overseen bythe Electric Reliability Council of Texas (ERCOT) are lookingfor ways to clarify wholesale price signals to entice developersto build much-needed new generation.

"This is our first investment in the power sector, which webelieve will be a strong asset for Koch Energy Services and anexcellent complement to our natural gas commercial activities,"said Koch spokesman Paul Baltzer.

Financial terms were not disclosed.

The Odessa plant began commercial operation in 2001. Itsells power into the state's $29 billion ERCOT grid.

Wichita, Kansas-based Koch Industries is a refining andpetrochemical company with annual revenue of $115 billion. Italso operates pipelines that transport crude, refined products,ethanol, natural gas liquids and chemicals. Koch units also makebuilding products, fertilizer and other industrial products.

Koch was active in power marketing back in 2001 when itformed a joint venture with New Orleans-based Entergy Corp to trade natural gas and power. The unit was sold toMerrill Lynch in 2005.

In Texas, Koch currently operates two refineries in CorpusChristi along with chemical operations located across the state.

A Koch pipeline unit recently completed projects in SouthTexas to expand the flow of Eagle Ford crude oil to refineriesalong the U.S. Gulf Coast.

Energy Capital Partners II purchased the Odessa plant in2011 for $335 million from PSEG Power, a unit of Public ServiceEnterprise Group as PSEG exited the Texas power market.

On Tuesday, Energy Capital Partners' EquiPower unit alsosaid it will close its recently acquired Brayton Pointcoal/oil-fired power plant in Massachusetts in 2017.

Recent sales of gas-fired power plants in Texas have beencompleted at prices much below the cost of new construction.

Koch said the transaction is subject to certain regulatoryapproval and could close late in the fourth quarter or in early2014.

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