By Eileen O‘Grady
HOUSTON, Oct 8 (Reuters) - A Koch Energy Services LLC unit will buy a natural gas-fired power plant in Texas, the company said on Tuesday, confirming that the purchase of the 1,055-megawatt Odessa Power plant from an affiliate of Energy Capital Partners LLC will be the Koch unit’s first foray into the power generation market.
Koch Energy Services itself is a unit of Koch Industries Inc , of the largest privately held companies in the United States. The plant is near the Permian Basin of West Texas where energy companies tapping into tight deposits of oil and gas have a growing and voracious appetite for electricity.
Koch Industries is a closely held company that does not reveal much information about its many subsidiaries.
The deal comes with some element of regulatory risk as the Texas Public Utility Commission (PUC) and the grid overseen by the Electric Reliability Council of Texas (ERCOT) are looking for ways to clarify wholesale price signals to entice developers to build much-needed new generation.
“This is our first investment in the power sector, which we believe will be a strong asset for Koch Energy Services and an excellent complement to our natural gas commercial activities,” said Koch spokesman Paul Baltzer.
Financial terms were not disclosed.
The Odessa plant began commercial operation in 2001. It sells power into the state’s $29 billion ERCOT grid.
Wichita, Kansas-based Koch Industries is a refining and petrochemical company with annual revenue of $115 billion. It also operates pipelines that transport crude, refined products, ethanol, natural gas liquids and chemicals. Koch units also make building products, fertilizer and other industrial products.
Koch was active in power marketing back in 2001 when it formed a joint venture with New Orleans-based Entergy Corp to trade natural gas and power. The unit was sold to Merrill Lynch in 2005.
In Texas, Koch currently operates two refineries in Corpus Christi along with chemical operations located across the state.
A Koch pipeline unit recently completed projects in South Texas to expand the flow of Eagle Ford crude oil to refineries along the U.S. Gulf Coast.
Energy Capital Partners II purchased the Odessa plant in 2011 for $335 million from PSEG Power, a unit of Public Service Enterprise Group as PSEG exited the Texas power market.
On Tuesday, Energy Capital Partners’ EquiPower unit also said it will close its recently acquired Brayton Point coal/oil-fired power plant in Massachusetts in 2017.
Recent sales of gas-fired power plants in Texas have been completed at prices much below the cost of new construction.
Koch said the transaction is subject to certain regulatory approval and could close late in the fourth quarter or in early 2014.