TVA completes US$436M acquisition of Kelson Energy's 968-MW Magnolia natural gas-fired power plant near Ashland, Mississippi; TVA has been buying power from plant since it began operating in 2003

Rachel Carter

KNOXVILLE, Tennessee , August 31, 2011 (press release) – The Tennessee Valley Authority, as part of its vision to lead the nation in low cost and cleaner energy by 2020, on Wednesday completed the $436 million purchase of the Magnolia Combined Cycle Gas Plant in northern Mississippi from Kelson Limited Partnership.

The Magnolia facility becomes the fourth high efficiency, combined cycle gas plant acquired or signed to a long-term lease by TVA since 2007. A fifth plant being built by TVA at the John Sevier site in East Tennessee is scheduled to come online in 2012.

The deal was approved by the Federal Energy Regulatory Commission on Aug. 17 and by the TVA board of directors on Aug. 18.

"TVA is working to assemble a diverse portfolio of cleaner, more efficient generating resources at favorable costs for our customers," said Bob Irvin, senior vice president for TVA Strategy & Planning.

"At less than half the cost of new construction, the fully permitted Magnolia plant will be a cost-effective addition to the TVA system," Irvin said.

Kim Greene, group president of TVA Strategy & External Relations, said the Magnolia acquisition is an excellent strategic fit for TVA. "Magnolia will provide greater generation flexibility in the western portion of our service territory," Greene said. "It also will help us meet a forecast need for more gas generation identified by TVA's new Integrated Resource Plan, our 20-year energy roadmap."

The three-unit natural gas-fired plant is located on a 374-acre site near Ashland, Miss. The plant is inside the TVA territory, is connected to a 500-kilovolt TVA transmission line, and has provided power to TVA from time to time since it began operation in 2003.

Kelson Limited Partnership, a wholly owned subsidiary of Columbia, Md.-based Kelson Energy Inc., has owned the plant since 2005.

The Magnolia plant has a capacity of 968 megawatts, which will make it TVA's largest combined cycle gas plant. These facilities generate electricity from gas turbines as well as from one or more generators powered by steam heated by the turbines' exhaust. They supply intermediate power requirements, which are longer than periods of peak power demand but shorter than continuous, base-load generation.

A TVA team will work with the Magnolia contractor workforce to assure continued safe, reliable operation of the plant during the transition to TVA management. The staff is currently managed under a contract with North American Energy Services Co.

"This is a modern facility with a very good operating history. We expect it will have a seamless integration into the TVA system," Irvin said.

The Tennessee Valley Authority, a corporation owned by the U.S. government, provides electricity for 9 million people in parts of seven southeastern states at prices below the national average. TVA, which receives no taxpayer money and makes no profits, also provides flood control, navigation and land management for the Tennessee River system and assists utilities and state and local governments with economic development.

(This release may contain forward-looking statements relating to future events and future performance. Although TVA believes that the assumptions underlying these statements are reasonable, numerous factors could cause actual results to differ materially from those in the forward-looking statements.)

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