By Tim Bradner
Alaska Journal of Commerce

The boards of the Alaska Industrial Development and Export Authority and Golden Valley Electric Association of Fairbanks approved minor changes Aug. 24 in an agreement for the electric cooperative to purchase the mothballed 50-megawatt Healy Clean Coal project.

The move signals the commitment of both parties to continue working toward a final sale agreement for the plant, despite the loss of Homer Electric Association as a customer for part of the electricity the plant would produce, said Ted Leonard, AIDEA's executive director.

Under the terms of the deal, Golden Valley would purchase the plant for $50 million and AIDEA would help the co-op finance the purchase with a low-cost loan. Golden Valley would operate the plant and purchase its power.

A change in the agreement was needed because the original deal, signed by AIDEA, Golden Valley and Homer Electric last February, included the Homer electric co-op as a major customer. The new agreement deletes the reference to Homer.

Other minor changes were made. Golden Valley would be able to pay for the purchase over 50 years rather than 45 years. AIDEA would make available a $45 million line of credit to Golden Valley, but a change in the agreement would allow the co-op the option of using lower-cost, short-term financing if it is available and use the AIDEA loan as long-term financing.

At the meeting, AIDEA board chairman Pat Galvin said that having long-term fixed-rate financing from AIDEA is a considerable advantage to Golden Valley under the deal because it would be difficult to obtain similar fixed-rate terms from other sources. Galvin is also commissioner of the state Department of Revenue.

The agreement provides for an interest rate ranging between 5 percent and 6.5 percent on AIDEA's financing of the purchase.

Previously the parties were to have final documents and agreements in place by Aug. 1. Because of the complication caused by Homer's pullout, the new deadline is the end of September, Leonard said.

The final agreement will depend on having a power sales agreement approved by the Regulatory Commission of Alaska, so the sale transaction cannot be finalized until that occurs, Leonard said.

The Healy plant was built in 1998 at a cost of more than $300 million, with the U.S. Department of Energy funding about half of the construction cost to test new-technology coal combustion and emissions control systems.

The plant began operating in 1998 and tested the technology for DOE for a year using different types of coal, including coal shipped from Outside. The federal agency said it was satisfied that the new technology systems performed and achieved goals in reducing pollution over amounts that would have been released from a coal plant using conventional technology.

The plant was to begin commercial operations in 1999 with GVEA as operator and sole purchaser of the power, but a dispute developed between AIDEA and the co-op after an operating test pointed up certain problems.

A decade of wrangling and lawsuits followed in which AIDEA argued that limited retrofits of the plants systems could solve the problems while Golden Valley pushed for a complete change in the plant, replacing the new technology with conventional coal burning systems.

Golden Valley argued that since the new systems have not been installed in any other operating coal plant, it would be difficult and expensive to maintain the operation. Under the new agreement, GVEA will do only limited retrofit.

Tim Bradner can be reached at

tim.bradner@alaskajournal.com.