Wholesale energy provider Southern Power has agreed to sell its Nacogdoches Generating Facility to utility company Austin Energy for $460m.

The Nacogdoches Generating Facility is a 115MW wood waste biomass-fuelled electric plant situated in Texas, US. The facility utilises wood biomass materials such as forest residue, pre-commercial thinnings, wood processing residues and clean municipal wood waste.

The plant currently supplies 100MW electricity to Austin Energy as part of a 20-year power purchase agreement.

Southern Power intends to use the proceeds from the sale to bolster the balance sheet of its parent firm, Southern Company to aid in predicted equity needs and further de-risk financing plans.

“This transaction provides benefits to Southern Power and offers Austin Energy the opportunity to own a significant regional energy resource.”

Southern Power president and CEO Mark Lantrip said: “The Nacogdoches Generating Facility is one of the largest wood-fired biomass plants in the US and has been a part of Southern Power’s generation fleet since 2012, demonstrating strong operating performance.

“This transaction provides benefits to Southern Power and offers Austin Energy the opportunity to own a significant regional energy resource.”

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Austin Energy hopes to avoid nearly $275m of additional costs over the remaining tenure of the power purchase agreement related to the Nacogdoches plant.

Austin Energy general manager Jackie Sargent said: “Acquiring the biomass plant relieves our obligation to make escalating capacity payments to a third party and, over time, reduces the associated cost impacts to our customers.

“This transaction is consistent with our efforts to manage our portfolio of generation resources in a responsible and cost-effective manner.”

Subject to customary closing conditions, the transaction is expected to be completed this year. Austin Energy is not planning any immediate changes to the facility’s operations.