Chesterton Tribune

BP buying Whiting electrical generating unit from NiSource; NIPSCO shut out of deal

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By KEVIN NEVERS

The Northern Indiana Public Service Company will not be purchasing the Whiting Clean Energy facility from its parent company, NiSource Inc., as NIPSCO announced in November as part of a plan to increase its electric generating capacity.

Instead, NiSource is selling the Whiting Clean Energy to BP for $210 million, NiSource spokesman Tom Cuddy told the Chesterton Tribune today. The facility, a 525 megawatt (MW) natural-gas fired combined cycle turbine located at the BP Whiting Refinery property in Whiting, has been providing steam to BP for its oil refining process for over a year. It has also been producing electricity sold on the Midwestern wholesale market.

Under its operating contract with NiSource, however, BP had the right of first refusal to purchase the facility should it ever be put on the block, Cuddy said, and BP elected to exercise that right after NIPSCO announced its intention to purchase the facility late last year.

“We see this transaction as another step on the path for long-term sustainable earning growth for our shareholders,” Cuddy said. “It will also allow us to continue to focus on our core assets.”

NIPSCO has indicated that it needs to increase its electric generating capacity by 1,000 MW by 2014, and that the purchase of the Whiting Clean Energy facility from NiSource, as well as the 535 MW Sugar Creek facility in Terre Haute from the LS Power Group, would be a preferable alternative to building new facilities.

A NIPSCO representative was not available this morning to discuss the company’s plans in the wake of BP’s acquisition of the Whiting Clean Energy facility. NIPSCO had estimated the combined purchase price of that facility and the Sugar Creek one at $539 million.

An action plan prepared last year by NIPSCO for the increase of its electric generating capacity assumes the probability of a mandate requiring the reduction of carbon emissions, economic growth in its service territory, and the expectation that the company will be required to carry a 15-percent operating reserve.

In addition to the purchase of natural-gas fired generating facilities, that action plan has two other planks as well: long-term purchase power agreements for 100 MW of renewable wind-generated power; and so called demand-side management, under which NIPSCO will encourage customers to lower their consumption and use energy more wisely.

Both the Whiting Clean Energy and Sugar Creek facilities burn natural gas to generate electricity in the first cycle. In the second cycle, the exhaust heat is captured, rather than vented into the atmosphere, and is used to generate steam, which then drives steam turbines to supply additional electric power.

 

 

Posted 4/24/2008