Black Hills Power Completes PPA With City of Gillette

Published: 17-Mar-2010

Black Hills Power has completed a seven-year power purchase agreement (PPA) with the City of Gillette, Wyoming, which replaces a previous agreement and provides an option to purchase 23% of Wygen III, a 110MW coal-fired facility that is expected to begin commercial operations next month.

The new agreement becomes effective when Wygen III becomes operational. It also recovers the costs associated with ownership and operation until the city completes the purchase of its share of the generation facility. Montana-Dakota Utilities previously purchased a 25% ownership interest in Wygen III.

Chuck Loomis, operating vice president of Black Hills Power, said: "It is great to continue our partnership with the City of Gillette, and we expect them to exercise their option to purchase later this year.

"This transaction has been in development for some time, so the completion of this new agreement and the option to purchase have no impact on the Black Hills Power pending South Dakota or Wyoming rate requests because the benefits were anticipated and included in the original rate filings."

The purchase option, which is subject to approval by the board of directors of Black Hills Power, provides that the City of Gillette would pay approximately $62m for 23% ownership. In addition, related agreements specify that the city will pay Black Hills Power for ongoing administrative services and its share of the costs to operate the facility.

The coal to fuel the plant will be purchased from the nearby Wyodak mine, which is owned and operated by Wyodak Resources Development.

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