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Acquisitions and divestments | 12 Months Ended
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Dec. 31, 2019
Acquisitions and divestments |
Acquisitions and divestments | 3. Acquisitions and divestments 2019 Acquisitions (a)South Carolina Biomass Plants On July 31, 2019, we completed the acquisition of two biomass plants in South Carolina, Allendale and Dorchester, from EDF Renewables Inc. The Allendale plant is located in Allendale, South Carolina and has been in service since November 2013. The Dorchester plant is located in Harleyville, South Carolina and has been in service since October 2013. The two plants are identical in design and each of the plants has a capacity of 20 megawatts. All of the output of the two plants is sold to Santee Cooper, a state-owned utility, under PPAs that run to 2043. The biomass fuel for the plants consists primarily of mill and harvesting residues. We believe the acquisition represents a meaningful addition to the level and length of our existing contracted cash flows. The final consideration paid for the two plants was $12.6 million. In September 2018, we made a $2.6 million down payment for the acquisition of the plants and paid the remaining due at closing, less working capital adjustments and transaction costs, from discretionary cash and cash equivalents. The South Carolina biomass plants are reflected in our Solid Fuel segment. See Note 22, Segment and geographic information. The following is a summary of the estimated fair values of the assets acquired and liabilities assumed:
Fair values |  |  |
Cash(1) |  | $ | 1.4
Accounts receivable |  |  | 4.3
Inventory |  |  | 2.9
Property, plant, and equipment |  |  | 4.0
Intangible assets |  |  | 2.6
Accounts payable |  |  | (2.0)
Accrued liabilities |  |  | (0.3)
Other liabilities |  |  | (0.3)
Total purchase consideration |  | $ | 12.6
| (1) |  | The cash acquired was received in October 2019 and has been included in the Cash paid for acquisition, net of cash received within the Statement of Cash Flows.
The $2.6 million of intangible assets recorded will be amortized straight-line through the remaining life of each plant’s PPA, which expire on October 31, 2043 (Dorchester) and November 18, 2043 (Allendale). Allendale and Dorchester contributed $10.8 million of revenue and net income of $1.0 million to the consolidated statements of operations for the period from July 31, 2019 to December 31, 2019. (b)AltaGas On August 13, 2019, we completed our acquisition of the equity ownership interests held by AltaGas Power Holdings (U.S.) Inc. ("AltaGas") in two contracted biomass plants, Craven and Grayling (as defined below), in North Carolina and Michigan. Craven County Wood Energy (“Craven”) is a 48 megawatt (MW) biomass plant in North Carolina that has been in service since October 1990. We acquired a 50% interest in the plant from AltaGas. The remaining 50% interest is held by CMS Energy. Craven has a PPA with Duke Energy Carolinas that will expire on December 31, 2027. The plant burns wood waste and poultry litter. Grayling Generating Station (“Grayling”) is a 37 MW biomass plant in Michigan that has been in service since June 1992. We acquired a 30% interest in the plant from AltaGas. The remaining interests are held by Fortistar (20%) and CMS Energy (50%). Grayling has a PPA with Consumers Energy, the utility subsidiary of CMS Energy, which will expire on December 31, 2027. The plant burns wood waste from local mills, forestry residues, mill waste and bark. Both plants are operated by an affiliate of CMS Energy. The purchase price totaled $18.7 million in cash consideration inclusive of approximately $0.2 million of acquisition-related transaction costs. Craven and Grayling are limited partnerships. We do not have financial control of the partnerships because decision-making is shared and the partners must agree on all major decisions for each of the entities. Accordingly, we account for our ownership in Craven and Grayling under the equity method of accounting because our ownership is between five and fifty percent resulting in Atlantic Power Corporation maintaining more than minor influence over the partnerships’ operating and financing policies. Craven and Grayling contributed $1.0 million in equity in earnings from unconsolidated affiliates to the consolidated statements of operations, and $0.9 million in equity method distributions for the period from August 13, 2019 to December 31, 2019. 2018 Acquisitions (a)Koma Kulshan Associates On June 18, 2018, we purchased a 0.5% general partner interest in Concrete Hydro Partners L.P. (“Concrete”) for $1.1 million from Mt. Baker Corporation with cash on-hand. Prior to the purchase, we owned a 0.5% general partner interest and a 99.0% limited partner interest in Concrete; following the purchase, we own 100% of the entity. Concrete was the owner of a 50% limited partner interest in Koma Kulshan Associates, L.P. (“Koma”). As a result of the purchase, our ownership of Koma increased from 49.75% to 50.00%. With 50.00% percent ownership of Koma, we did not have financial control of the entity as the two owner parties had joint control and substantive participating rights through the structure of the partnership agreement. Accordingly, since we did not obtain control of the project, we continued to account for Koma under the equity method of accounting as of June 30, 2018. The $1.1 million purchase was accounted for as an additional equity method investment in Koma. On July 27, 2018, we acquired the remaining 50% partnership interest in Koma from Covanta Energy Americas, Inc. (“Covanta”) for a total purchase price of $12.5 million including working capital. As a result of this purchase, we own 100% of Koma and consolidated the project on the date of the acquisition. We completed this acquisition because we view hydro projects as assets that will provide us both near and long-term value. Our acquisition of Koma is accounted for under the acquisition method of accounting as of the transaction closing date. The $12.5 million total purchase price was funded with cash on-hand. We assumed operation of the project from Covanta on the acquisition date of July 27, 2018. The final purchase price allocation for the business combination is estimated as follows:
Fair value of consideration transferred: |  |  |
Cash |  | $ | 12.5
Other items to be allocated to identifiable assets acquired and liabilities assumed: |  |  |
Book value of our investment in Koma at the acquisition date |  |  | 5.4
Gain recognized from step acquisition |  |  | 7.2
Total purchase price |  | $ | 25.1
Final purchase price allocation |  |  |
Cash |  | $ | 0.8
Working capital |  |  | 0.1
Property, plant, and equipment |  |  | 1.2
Intangible assets |  |  | 24.8
Asset retirement obligation |  |  | (1.8)
Total identifiable net assets |  | $ | 25.1
The fair values of the assets acquired and liabilities assumed, as well as the fair value of our previous 50% equity interest in Koma, were estimated by applying an income approach using the discounted cash flow method. These measurements were based on significant inputs not observable in the market and thus represent a level 3 fair value measurement. The primary considerations and assumptions that affected the discounted cash flows included the operational characteristics and financial forecasts of the acquired facility, remaining useful life and a discount rate based on the weighted average cost of capital adjusted for the risk and characteristics of the project. We recognized a $7.2 million gain recorded in other income in the consolidated statements of operations for the year ended December 31, 2018 as a result of remeasuring our previous 50% equity interest in Koma immediately before the business combination to fair value. The $24.8 million of intangible assets recorded will be amortized straight-line through the remaining life of Koma’s PPA, which expires on March 31, 2037. Additionally, we recorded $0.5 million of deferred tax liabilities and deferred tax expense related to the step acquisition of Koma Kulshan. Koma contributed $1.1 million of revenue and net income of $0.0 million (excluding the $7.2 million gain recognized from the step acquisition) to the consolidated statements of operations for the period from July 27, 2018 to December 31, 2018. The impact to pro forma results of operations was not significant to the years ended December 31, 2019, 2018 and 2017. 2017 Divestment (a)Selkirk Project On November 2017, we sold our 17.7% interest in Selkirk Cogen Partners, LP (“Selkirk”) to JMC Selkirk LLC, the project’s majority owner, for $1.0 million. Selkirk was accounted for under the equity method of accounting. In the second quarter of 2017, we recorded a $10.6 million impairment at Selkirk and wrote our equity investment down to zero. As a result of the sale, we recorded a $1.0 million gain on sale, which is included as a component of equity in earnings (loss) from unconsolidated affiliates in the consolidated statement of operations for the year ended December 31, 2017.

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