Atlantic Power Corporation (TSE:ATP, NYSE:AT) today announced that has agreed to acquire Covanta's (NYSE:CVA) 50% interest in Koma Kulshan, a 13 megawatt (MW) run-of-the-river hydro project located north of Seattle for US$11.8mln.
The company will become the project's 100% owner and operator and the transaction is expected to close in the third quarter of 2018. The firm said it will also buy out the operation and maintenance (O&M) contract held by Covanta for US$0.3 million.
The independent power producer owns power generation assets in nine states in the United States and two provinces in Canada.
Koma Kulshan has been in commercial operation since 1990, with all output being sold to Puget Sound Energy under a power purchase agreement that runs through March 2037.
"This is an important milestone for Atlantic Power as it marks the first external growth investment after a three-year business restructuring process," said president nd chief executive officer, James J. Moore, Jr.
"We view our hydro assets as having excellent near-term value and strong long-term prospects, so we are pleased to acquire the remaining interests in Koma Kulshan. By buying out the O&M and management contracts as well, we will have 100% ownership and operating control of a hydro project with a PPA that has a 19-year remaining term."
The company's existing 49.75% ownership interest in Koma Kulshan is held through a partnership.
Earlier this month, Atlantic Power acquired the 0.25% interest held by the managing general partner for US$1.1 million. The acquisition eliminates the payment of management fees to the general partner going forward.
The company said it plans to fund the acquisition from discretionary cash.
The company said the total consideration of approximately $13.2 million represents a multiple of approximately 10 times the company's estimate of pro forma project adjusted EBITDA and approximately 11 times the company's estimate of pro forma cash distributions.
Both estimates are based on average water conditions.