El Paso Corporation has agreed to sell the equity interests in its Cedar Brakes I and Cedar Brakes II subsidiaries to a wholly-owned subsidiary of Arroyo Energy Investors, for cash proceeds of approximately $106 million.
In addition, El Paso Marketing has entered into an agreement to transfer its obligations to supply power to the Cedar Brakes I and II entities to Constellation Energy Commodities Group.
The power supply contract associated with the Cedar Brakes I power purchase agreement requires the delivery of about 856,000 megawatt hours per year (MWh/y) through August 2013. The power supply contract for Cedar Brakes II power purchase agreement requires the delivery of about 1,500,000MWh/y through 2008, reducing to about 1,171,000MWh/y through March 2013.
The transaction is expected to close in the first quarter of 2005 and is subject to Federal Energy Regulatory Commission approval and other consents. The sale will eliminate approximately $575 million of associated non-recourse debt from El Paso’s balance sheet. The equity sale will result in a book loss of around $222 million, and there will also be a recognition of a loss on the transfer of the contracts.
This sale is part of El Paso’s strategy to sell its domestic power portfolio and is part of its long-range plan to reduce the company’s debt, net of cash, to approximately $15 billion by year-end 2005.