Progress Energy Florida and Kinder Morgan Energy Partners, L.P. (NYSE: KMP) today announced a long-term agreement under which KMP will provide Louisiana-based terminaling services to facilitate a more secure supply of coal for Progress Energy’s Crystal River power plant in Citrus County, Fla.
In recent years, and due to higher demand, an increasing portion of domestic terminal capacity has been allocated to coal exporters, including both metallurgical and steam coal. This contract is an important part of Progress Energy’s ability to fuel the Crystal River power plant to meet customer electricity demand for the long-term. The contract will also provide savings for Progress Energy Florida customers by enabling more flexibility in transporting domestic coal - such as Illinois Basin or Central Appalachian coal – to the power plant.
Under the contract, KMP’s International Marine Terminal in Myrtle Grove, La., will handle up to 4 million tons of coal per year. The base 10-year agreement commences in 2013 with options for up to 20 years. The coal will be delivered from Central Appalachian or Illinois Basin regions by river barge or other means to KMP’s facility. There it will be stored, combined and delivered for barge delivery across the Gulf of Mexico to Crystal River, where Progress Energy Florida operates four coal units totaling 2,311 megawatts.
“This is one of the many aspects of fuel procurement that takes place behind the scenes, but that is vitally important to a secure and efficiently priced supply of coal to support reliable power plant operations,” said Vincent Dolan, CEO and president of Progress Energy Florida.“KMP is delighted to enter into this long-term contract to handle coal for Progress Energy, which is expected to be accretive to cash available to KMP unitholders when the services begin in 2013,” said Jeff Armstrong, president of KMP’s terminals business. “We continue to invest substantial capital to help provide long-term solutions for the coal industry and to meet our customers’ needs.” He noted that KMP and its partner, AEP, are investing approximately $106 million to expand and upgrade the IMT terminal to handle the increased needs for export and domestic coal.
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