GPU Deal Makes Sithe Biggest U.S. IPP
New Jersey utility holding company GPU Inc. has sold its
non-nuclear generating assets for $2.62 billion - 2.5 times book
value or $510 per kilowatt. The majority of generating assets were
bought by French- and Japanese-owned Sithe Energies Inc. of New
York City, which bought assets in New Jersey, Pennsylvania and
Maryland. The deal will make Sithe the largest U.S. independent
Sithe will pay $1.68 billion for 4,117 MW of capacity at 23
plants that generate 6,972 gross MW of electricity. With the GPU
assets, Sithe will have generating capacity in North America of
7,777 MW, including the generating assets of Boston Edison, which
it bought in May for about $536 million. The GPU transaction is
expected to close in the second half of 1999, subject to regulatory
approval from New Jersey, Pennsylvania and Maryland.
Noting Sithe will now become the largest independent power
producer in the United States, William Kriegel, Sithe CEO, said,
"This is a defining transaction for Sithe. It more than doubles our
North American generating capacity. When taken together with our
already significant presence on the East Coast, this acquisition
makes Sithe a principal supplier of electricity to the three major
interconnected power pools, stretching from the Mid-Atlantic states
to Maine. We are excited to be a leading power producer in this
region where electric restructuring is already well advanced and
where the demand for electric power is among the highest in the
Sithe plans to develop additional capacity at selected GPU
sites, potentially adding another 3,000 MW of gas-fired generation
over the next several years. Of the 23 plants Sithe is acquiring,
17 are in Pennsylvania, five are in New Jersey and one is in
Maryland. The plants use coal (50%), oil/gas (46%) and hydro (4%).
Sithe will manage and operate all 6,972 gross MW generated.
Sithe currently operates 28 power plants in the United States
and Canada, including 16 in its target U.S. market-the
Northeast-six in California, three in Idaho and one each in North
Carolina, Colorado and Ontario. The company's flagship station is
the 1,040 MW gas-fired Independence plant in Scriba, NY, which
opened in 1994. Sithe also has an extensive global portfolio of
projects under operation, construction or active development.
Countries involved include China, Australia, Pakistan, the
Philippines and Thailand. In total, Sithe, including its domestic
projects and the GPU acquisition, will generate more than 20,000
gross MW of power when its development and expansion projects are
completed. All new generation is to be gas-fired, a spokeswoman
said. Projects include 2,800 MW of new capacity on the Boston
Edison sites Sithe recently acquired. The new generation there is
to cost more than $1 billion.
In a separate deal, FirstEnergy Corp. of Akron, OH, agreed to
buy from GPU 87 MW of capacity at the Seneca Pumped-Storage
Hydroelectric Generating Station, near Warren, PA. FirstEnergy
already owns the remaining capacity at the 438 MW plant.
FirstEnergy was the successful bidder for this capacity in an
auction of GPU's generating plants. The $43 million transaction is
expected to be completed by June 1999.
GPU is exiting the generation business to focus on expansion of
its infrastructure business. Plant sales alleviate stranded costs,
allowing the company to be more competitive. Founded in 1984, Sithe
is 60% owned by Vivendi, France's largest services company, 29%
owned by Marubeni Corp., a Japanese trading company, and 11% owned
Joe Fisher, Houston