After Southern California Edison Company (SoCalEd) sold ten power plants in November, for nearly three times their book value, other US utilities have been rushing to sell their generation assets and improve their bottom line.
The divestiture of generation assets by utilities has always been a part of the ongoing deregulation of the US electricity market. However, up to now most utilities had been dragging their feet on the sale of generation assets, until the SoCalEd sale.
Among the utility companies who have offered their power plants for sale during the last month are Niagara Mohawk (NiMo) of New York, San Diego Gas and Electric (SDG&E), Montana Power, Orange & Rockland (O&R) of New York, and Boston Edison.
Southern California Edison, one of the first off the blocks, sold ten gas-fired generating plants for US$1.115bn, 2.65 times their book value of $421M. The plants, with a combined generating capacity of 7532MW, were sold by auction, starting with a regulatory filing one year ago. Forty bidders participated in the auction and SoCalEd identified the buyers as AES Corp, Houston Industries Inc., a consortium of NRG Generating (US) Inc and NGC Corp’s Destec unit, and Thermo Electron Corp.
As part of its deregulation proposal, NiMo has filed with the New York state Public Service Commission a plan to divest its fossil-fuelled and hydroelectric generating assets by auction. Niagara Mohawk’s fossil and hydroelectric generating portfolio includes 4217MW of capacity. As part of the auction, the company’s 72 hydroelectric plants have been divided into two packages. Package one consists of 55 plants with 378MW of capacity located north and west of Utica. Package two consists of 17 plants – 283MW of capacity – located east of Utica. Potential buyers may bid on the entire portfolio of generating assets or any combination of the fossil assets and/or hydro packages.
SDG&E has announced that it will auction its fossil fuel power plants and its combustion turbines, as well as its 20 per cent interest in the San Onofre nuclear station and its portfolio of long term power contracts.
Montana Power Company has offered to sell all of its electric generating facilities – 13 dams (with one storage reservoir and 12 hydroelectric generators) and four coal-fired plants – as well as its leased interest in another coal fired-plant and its contracts for power purchased from independent producers.
New York’s Orange & Rockland Inc has offered its generating assets as a single package of eight facilities, including the utility’s Swinging Bridge and Grahamsville hydroelectric generating stations located primarily in the Sullivan County communities of Lumberland and Forestburgh. The total net book value of the assets is approximately US$260M.
Pacific Gas & Electric has already sold three California power plants with a combined capacity of 2645MW to Duke Energy Corporation of North Carolina. The selling price of US$501M is said to be 30 per cent more than the book value. California’s deregulation plan required PG&E and southern California Edison to sell half of their fossil fuel-fired power plants. Both utilities, however, have decided to sell all their assets over the next few months. PG&E plans to sell another five plants in March.
In the meantime, Standard & Poor’s has affirmed with a positive outlook, the ratings of Central Maine Power Co after the utility announced that it has agreed to sell its 1185MW of non-nuclear capacity (373MW hydro, 781MW fossil, and 31MW biomass) to FPL Group Inc for US$846M before taxes. The premium is about 3.5 times above the US$240M book value of the plants.
S&P has also affirmed the ratings of Boston Edison Co with a positive outlook, after the Boston utility announced the sale of its 2000MW of fossil-fired generating assets to Sithe Energies Inc for US$536M, about 1.2 times the book value of US$450M.
Massachusetts based Unitil/FG&E has announced that it has issued its initial offer on the sale of its hydro and fossil generating assets to 350 potential bidders.