Florida Public Utilities Company and Rayonier Advanced Materials Join Forces to Develop Combined Heat & Power Plant

Florida Public Utilities Company, wholly-owned subsidiary of Chesapeake Utilities Corporation, and Rayonier Advanced Materials, Inc., recently joined forces to create the Eight Flags Energy, LLC Combined Heat and Power (CHP) plant.  Combined Heat and Power, also known as cogeneration, is the simultaneous production of electricity and heat from a single fuel source.  Fueled by natural gas, the plant will be built on a site leased from Rayonier Performance Fibers, LLC, a subsidiary of Rayonier Advanced Materials, Inc., and is adjacent to a Rayonier Performance Fibers cellulose specialties plant.  

The CHP plant, which is expected to be operational in mid-2016, will generate steam for sale to Rayonier Performance Fibers for use in the operation of its cellulose specialties production facility.  

The CHP plant will produce approximately 20MW of base load power, which FPU will purchase for distribution to its electric retail customers. The Florida Public Service Commission (“FPSC”) has approved a Purchased Power Agreement (“PPA”) for a 20-year term, which is expected to generate approximately $28.0 million in savings to FPU’s electric customers over the life of the PPA.

The FPSC also approved the extension of an existing energy purchased power contract between FPU and Rayonier Performance Fibers. Currently, boilers at the Rayonier Performance Fibers site provide steam and generate electricity, and the company sells the excess electricity generated to FPU. The original contract has been in place and has produced savings for FPU customers for around two years.

The approved extension will extend the term of the original contract for an additional 14 years, from October 2022 to September 2036, and will generate an estimated savings of $8.2 million for FPU customers over the amended contract term and align the term of this contract with that of the PPA.

The projected investment to be made by Chesapeake and its subsidiaries in constructing the CHP project and associated facilities is approximately $40.0 million.

4/30/15