COLUMBUS: American Municipal Power, Inc. (AMP) has entered into a non-binding memorandum of understanding (MOU) with FirstEnergy Corp. (NYSE: FE) regarding the Fremont Energy Center, a 707 MW (fired) natural gas combined cycle generation plant currently under construction by FE and located predominantly in the City of Fremont, Ohio. The Fremont Energy Center is owned by FirstEnergy subsidiary, FirstEnergy Generation Corp.

Construction on the Fremont Energy Center is largely complete and the plant is expected to be commercially available by year end. Under the MOU, AMP and FirstEnergy have agreed to enter into exclusive negotiations toward AMP executing a definitive agreement by March 11, 2011, to purchase the facility from FE on or about July 1, 2011.

The Fremont Energy Center was formerly owned by Calpine Corporation, which filed bankruptcy in 2005. Calpine subsequently suspended construction of the plant and it was auctioned in 2007. AMP conducted considerable due diligence and bid on the facility at the time — with FirstEnergy ultimately having the winning bid.

The Fremont Energy Center fits well with AMP’s overall power supply strategy of reducing its members’ long-term reliance on wholesale power markets through development of diverse generation assets. AMP members presently rely on the wholesale market for more than 90 percent of their intermediate power supply needs. Based on AMP members’ long-term power supply analysis conducted by R.W. Beck (an SAIC company), the Fremont facility would provide a cost-effective, environmentally friendly, asset-based alternative to wholesale energy and capacity markets.

Analysis indicates that when compared to natural gas combined cycle alternatives, the Fremont facility would provide a $350 million savings to participating AMP members over 30 years, as well as a favorable energy market location and fuel supply optionality. Also important to AMP members is the mitigation of construction and permitting risks by acquiring a facility that is largely complete.

In late 2010, AMP announced its intent to develop a natural gas combined cycle facility on land in Meigs County that was formerly the site for a proposed coal-fired facility known as the American Municipal Power Generating Station (AMPGS). Those plans have been suspended based on the new developments with the Fremont facility.

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