San Antonio’s municipal power utility, CPS Energy, has agreed to buy the 800 MW Rio Nogales combined cycle gas fired plant in Texas, US from Tenaska Capital Management.

The exact purchase price is unknown, though CPS is preparing to issue $521m in bonds in connection with the acquisition, and bought the gas plant to avoid spending $1bn on environmental upgrades at its JT Deely coal-fired plant, which is scheduled for retirement in 2018.

Project Finance reports that the acquisition is expected close in early April, and Moody’s has assigned an Aa1 rating to the CPS system revenue bonds that will fund the acquisition.

Rio Nogales is located in Seguin, Texas, and has been in operation for ten years, with a projected remaining life of 30 to 40 years.

The $1.645bn financing for the acquisition, led by Credit Suisse and Goldman Sachs, consisted of an $850m first lien, $495m second lien, and $300m of ancillary debt. Under the financing documents for the debt, which signed in 2006, 75 per cent of the proceeds of any sale must go towards paying off the first lien debt.

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