Xcel Energy wants to pay $650 million to buy the Mankato Energy Center, a major gas-fired electricity plant, from Atlanta-based Southern Power.
Minneapolis-based Xcel on Tuesday announced the intended purchase, which must be approved by the Minnesota Public Utilities Commission and federal regulators.
The Mankato Energy Center consists of two gas-fired power generators, one of which began operations in 2006. Construction on the second generator is expected to be done by mid-2019. Xcel buys the existing plant's output under a long-term contract and was set to do the same with the new one.
Instead, with the purchase, the generators would become part of Xcel's rate base. "Securing the Mankato gas plant is a great value for our customers as it will provide significant cost savings and operating flexibility for the long term," Chris Clark, Xcel's president for Minnesota and the Dakotas, said in a statement.
The two Mankato generators together are "expected to operate as a single high-efficiency natural gas-fired combined cycle power plant," Xcel said in a federal securities filing. A "combined cycle" plant uses both gas turbines — which are similar to jet engines — and steam turbines, increasing its production efficiency.
When the new generator comes online, the Mankato center will have a generation capacity of 760 megawatts of electricity, making it the largest gas operation in Xcel's portfolio. The biggest now is the High Bridge plant in St. Paul, which has a capacity of 530 megawatts among its three generators.
Xcel, Minnesota's largest electric utility, also plans to build an $800 million, 786-megawatt gas-fired generator in Becker, Minn. It would replace two 680-megawatt coal-fired generators in Becker, which are scheduled to close by 2026. Xcel also is adding large amounts of wind power to its generation fleet.
The Mankato center was sold to Southern Power in 2016 for $395.5 million.