Xcel Energy on April 6 announced the sale of the 760-MW Mankato Energy Center (MEC) gas-fired power plant in Minnesota, less than three months after purchasing the plant for $650 million from Southern Co.
Xcel had said the MEC was an important piece of the utility’s goal to be carbon-free by 2050. Xcel reached a deal to purchase the MEC in 2018, though it did not take over operations until January of this year. Xcel created an unregulated subsidiary after Minnesota regulators in 2019 rejected Xcel Minnesota’s bid to buy the plant through its rate base. Xcel is now selling the plant for $680 million to Denver, Colorado-based Southwest Generation, and Xcel in a news release said it plans to use the net gain on the sale to fund its corporate giving efforts, including support related to the COVID-19 pandemic.
“This is an unprecedented time, and we want to do our part to support our communities as we face the challenges brought on by the COVID-19 pandemic,” said Ben Fowke, Xcel’s chairman and CEO, in the release. “The Mankato Energy Center and its workforce provides essential services for local and regional economies and that will not change. And now more than ever, the people we serve need safe, reliable, affordable power.”
“Southwest Generation is excited to add the Mankato Energy Center to our growing portfolio. The plant is a key part of the transition to a lower carbon grid and we’re pleased to expand our relationship with Xcel Energy, which is leading that transition in the United States,” said John Foster, CEO of Southwest Generation.
Clean Energy Goal
Xcel was the first large U.S. investor-owned utility to establish a goal of 100% carbon-free energy by 2050. The utility, headquartered in Minneapolis, Minnesota, and serving customers in eight states, has an initial target of reducing carbon emissions 80% below 2005 levels by 2030. It had filed to acquire the two-unit MEC in 2018, saying the plant was critical to its clean energy plan, although state regulators said the utility’s plan for the plant would not be cost-effective for customers until sometime in the 2030s. It created an unregulated subsidiary to buy the plant, putting the MEC outside its customer rate base, meaning customers would not be responsible for any stranded asset costs.
Southwest Generation is a private energy company that is building a portfolio of natural gas-fired power generation assets, currently operating eight plants with 1,700 MW of generation capacity across Arizona, California, New Mexico, and Colorado. It currently sells Xcel Energy electricity from the Arapahoe and Fountain Valley plants in Colorado. Southwest Generation is owned by institutional investors advised by JP Morgan Asset Management.
Xcel in its news release said selling the MEC “will continue Xcel Energy’s focus as a fully regulated utility company.” It said proceeds from the sale “will primarily be used to reduce Xcel Energy’s overall financing needs and improve the company’s credit metrics, with the net gain from the sale to fund its corporate giving and COVID-19 relief efforts.”