SO Southern Co

Calpine Corp. has agreed to sell its Mankato Power Plant to a unit of Southern Co. for $395 million, an effort to pay down some debt.

The Mankato plant, a combined-cycle power plant in Minnesota, provides electricity to Northern States Power, a unit of Xcel Energy Inc., under a tolling agreement that runs through July 2026. In addition, a 345-megawatt expansion is currently in advanced development. A natural gas-fired combustion turbine and a heat recovery steam generator will be added, with the incremental steam increasing the power production and improving the overall efficiency of the plant. The expanded capacity is expected to be operational by June 2019.

In addition to corporate debt reduction, the company said the proceeds of the sale to Southern Power would also be used for other corporate purposes.

In late July, Calpine reported declining revenue and posted a loss for the third quarter in a row amid a challenging environment. Cheap gas prices have pushed wholesale electricity prices down, putting pressure on the sales and stock prices for big U.S. power-plant owners.

The Mankato plant transaction, subject to regulatory approval, is projected to close in the fourth quarter.

Shares edged down 0.5% to $12.42 in morning trading in New York.

Write to Joshua Jamerson at joshua.jamerson@wsj.com

(END) Dow Jones Newswires

September 01, 2016 10:45 ET (14:45 GMT)

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