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NRG Energy proposes $526M expansion at Cedar Bayou plant in east Baytown

August 11, 2022

Houston-based NRG Energy Inc. (NYSE: NRG) is seeking to expand a power station in Chambers County.

NRG proposed adding a 690-megawatt electric-power generation block at its existing Cedar Bayou power production complex in east Baytown, according to tax incentive applications recently made public by the Texas comptroller's office. The expansion project would include a natural gas-fired combustion turbine in a single-shaft, combined-cycle configuration that would generate electricity for sale on the wholesale power market.The new combined-cycle facility would use a new Mitsubishi M501JAC combustion turbine from Mitsubishi Power, NRG said. The project would be developed on a roughly 9-acre greenfield lot near the existing Cedar Bayou facilities, southeast of Texas Highway 146 and west of FM 1405.

To develop the facility in Chambers County, NRG is seeking a taxable value limitation under Chapter 313 of the Texas Tax Code.

NRG said it plans to invest nearly $526.8 million in the project, but the power company is seeking an agreement with the Goose Creek Consolidated Independent School District to limit the project's taxable valuation to $100 million for its first 10 years in operation. Under NRG's proposal, the new unit at Cedar Bayou would begin commercial operations in 2025; the first year of taxable value limitation would begin in 2026.

"Should the project be approved by the company’s board, receive sufficient debt financing support, and be constructed, it would increase the state’s power grid capacity, reliability and performance, while generating stable, low-cost energy for residential, commercial and industrial power customers in the region," NRG said in the application.

NRG said it has applied for and received an air permit related to the expansion project — dubbed Project Moonshot — and the company is soliciting debt and equity financing proposals in addition to applying for a Chapter 313 value limitation. Construction of the expansion project would require approximately 500 full-time construction workers, and Project Moonshot would create 18 new permanent jobs in Chambers County.

NRG also said receiving the Chapter 313 limitation is a determining factor in constructing the new unit in Chambers County. The company has existing natural gas-fired plants in Texas, New York, Maryland, Connecticut, Illinois and California. NRG said a critical factor in developing the new generation unit is locating it next to or near an existing facility to leverage the company's land ownership, personnel, and gas and water supplies.

"If Project Moonshot cannot offset a significant portion of the property tax liabilities associated with expanding in Texas, one of the other five states would receive the proposed investment," NRG said.

All Chapter 313 agreements must be approved by the Texas comptroller, who must decide that the incentives are a determining factor for the project to go ahead with development within Texas.

NRG said the expansion at Cedar Bayou would also help the Texas power grid managed by the Electric Reliability Council of Texas by providing more controllable, fast-start power generation to complement a growing load of intermittent renewable energy sources, like wind and solar.

"A viable energy plan for ERCOT includes power generating assets that can fill the gap during the intermittent periods of renewable electric generation, and having callable power generation near large power consumption centers, such as Houston, increases peak system capacity and addresses reliability challenges currently impacting the state electric grid," NRG said.

Developers of solar projects, wind farms, renewable fuels plants, semiconductor manufacturing plants, petrochemical projects and other industrial facilities have sought appraised value limitations with Texas school districts through Chapter 313 agreements. Even an Australian producer of rare earth materials recently applied for incentives through Chapter 313 to build a processing facility on the Texas Gulf Coast.

The tax program is slated to expire at the end of the year after the Texas Legislature did not advance a bill that would have extended Chapter 313 by two years.

NRG Energy named Houston as its sole headquarters last year. The company used to be based in Princeton, New Jersey, and then claimed dual headquarters in Princeton and Houston after acquiring Houston-based GenOn in 2012. NRG is also the parent company of Houston-based Reliant Energy.

Meanwhile, the power company continues to work through repairs after a fire at another one of its Houston-area power plants. The 610-megawatt Unit 8 at NRG's WA Parish Power Generating Station in Fort Bend County went offline just before midnight May 8, according to ERCOT data. Based on the company's assessment of needed restoration efforts, NRG expects the coal unit to return to service by the end of the second quarter of 2023, the company said in its Q2 2022 earnings report earlier in August.

By Chris Mathews, Houston Business Journal