The city of Austin has purchased an East Texas renewable power plant for $460 million as a means to escape from a punitive contract. The deal reached late Wednesday wiped out some of the financial hit of the remainder of a 20-year, $2.3 billion contract set to run through 2032, the head of Austin Energy said.

Austin Energy General Manager Jackie Sargent told the American-Statesman that the utility expects to save $275 million by buying the Nacogdoches Generating Facility, a wood chip-fueled biomass power plant that the city has used sparingly because the facility was often too expensive to run. The city has been the plant's only customer since 2012.

The Statesman first reported April 5 the possibility of the city purchasing the plant. At the time, city officials were bound by a strict confidentiality agreement that prevented them from acknowledging a possible sale. In actuality, though, the Austin City Council had already voted during a closed session on March 28 to buy the facility.

Southern Company, the plant's owner, accepted the offer this week, notifying Austin Energy at 10:40 p.m. Wednesday.

Sargent described the deal, one of the largest single purchases in the city's history, as a form of refinancing. Under a power purchase agreement with Southern Company, Austin Energy would have been on the hook for escalating annual payments whether or not the city bought energy from the 115-megawatt plant in Sacul, about 30 miles northwest of Nacogdoches. Those payments were in the tens of millions of dollars each year and were expected to grow to an estimated $90 million in the contract's last year.

"What this allows us to do is to avoid significant future costs had we remained under the power purchase agreement that we had with (Southern Company)," Sargent said.

The deal remained under wraps because of a strict confidentiality agreement that Southern Company required the city to sign to participate in the competitive sale, Sargent said. Barclays negotiated the sale for Southern Company, and the city hired a national law firm for $300,000 to negotiate on its behalf, according to a city spokesman.

Mayor Steve Adler said Thursday he had periodically looked into the one-sided biomass contract since he became mayor in 2015. When he heard that the plant was for sale, it was "welcomed news," he said.

"We went from a tenant position to buying the home, and the house payments are less than the rent," Adler said.

To finance the purchase, Austin Energy will issue taxable revenue bonds that will be paid out over 13 years, the same amount of time remaining on the city's contract with Southern Company, Sargent said.

In the purchase, Austin Energy is acquiring Nacogdoches Power LLC, the holding company for the biomass facility. Included in the deal is the assumption of the power purchase agreement that required the city to pay for electricity from the facility whether it used any energy from it or it didn't.

The sale will require no further action by the City Council. The council was permitted to approve the offer without the public's knowledge under a section of the Texas open meetings law that concerns competitive financial matters involving government entities that oversee utilities.

Council Member Kathie Tovo, the longest tenured member of the City Council, said the vote on the sale is the only vote she has ever taken during an executive session involving council members.

"The circumstances under which you can do that are extremely limited, and we talked about it," Tovo said.

Eleven years ago, the council sparked the construction of the renewable power plant in Sacul by inking a 20-year contract amid concerns that fossil fuel prices would skyrocket in the wake of new federal carbon taxes. But those carbon taxes never materialized, natural gas prices plummeted, and biomass-generated energy became an expensive afterthought.

The developments created a situation in which the city was paying for operations at a power plant that was not generating any electricity. The city does buy power from the facility when market prices for electricity peak during the summer.

Former City Council Member Don Zimmerman called the contract a $600 million "boondoggle."

"I guess it's behind us now," said Zimmerman, who sat on the dais in 2015 and 2016. "It’s a powerful argument for why you should not have a government-run utility."

Sargent said the city will continue to staff the plant and that its operations will be a part of the city's infrastructure portfolio, but she said the future of the biomass facility is not clear.

"We will continue to do resource planning, and we will evaluate the future economic viability of this facility through that process," Sargent said. "We intend right now to continue to operate the facility as it has (operated). We are making no immediate changes to operations. And we think that is important."