Calpine has agreed to divest its Mankato power plant to Southern Power in a deal valued at $395.5m.
The 375MW natural gas-fired, combined-cycle plant is located in Minnesota.
Calpine's president and CEO Thad Hill said: “Mankato is a modern, efficient, and well-performing plant under long-term contract to the local utility and with an expansion in advanced development.
“This sale is another step in our capital allocation plan to divest plants in non-core regions when we see an attractive value opportunity.”
The plant is supplying Northern States Power, a subsidiary of Xcel Energy, until July 2026. Its facilities are being expanded by adding 345MW capacity to serve this agreement.
Work includes the addition of a natural gas-fired combustion turbine and a heat recovery steam generator. The incremental steam is expected to increase production of the existing turbine, while improving the overall efficiency of the plant. The expanded capacity will enter service in June 2019.
Subject to customary closing conditions, an antitrust review under the Hart-Scott-Rodino Act, and approval from the Federal Energy Regulation Commission, the sale is expected to be completed in Q4 of this year. Proceeds will be used towards corporate debt reduction and other corporate purposes.
Calpine has 84 power plants either in operation or under construction, totalling more than 27,000MW of generation capacity.