Dynegy, NRG Buying SDG&E Generation
San Diego Gas & Electric (SDG&E) completed divestiture of
all its fossil-fueled generation with the selection of Dynegy Inc.
and NRG Energy Inc. as the joint winning bidder for its 951 MW
Encina Power Plant in Carlsbad, CA.
Dynegy and NRG Energy will pay $356 million in cash to acquire
both the plant and 17 combustion-turbine generators, which are used
during times of peak electricity load. The sales price of $356
million is 3.8 times the book value of the assets as of Dec. 31,
1997 and represents total generation of 1,218 MW.
"This acquisition clearly aligns with our corporate strategy to
maintain our leadership in the Btu convergence business by
continuing to expand our energy portfolio," said Chuck Watson,
Dynegy CEO. "The Encina Power Plant and combustion turbines will
increase Dynegy's power generation and asset base in a growing
competitive marketplace, strengthening our ability to provide
innovative solutions for our customers. Dynegy will continue to
capitalize on opportunities to integrate generation assets with our
marketing and trading capabilities throughout North America."
"This sale will go a long way toward helping us fully recover
our transition costs, which will provide direct and immediate
benefits to both our shareholders and customers," said Edwin A.
Guiles, president of SDG&E. "This sale also marks the end of a
chapter in SDG&E's storied history, completing the divestiture
of all our fossil-fueled generating assets. SDG&E now has a core
focus of becoming a world-class energy delivery company."
Proceeds from the sale of the Encina plant will be applied to
reduce the Competition Transition Charge (CTC) SDG&E customers
pay. Under state law, Dynegy and NRG Energy will be required to
contract with SDG&E for at least two years for the continued
operation and maintenance of the Encina plant and the combustion
Dynegy will provide fuel management services and market energy
out of the Encina Power plant and combustion turbines for the
partnership. NRG will manage the operation of the power generation
assets out of its newly established San Diego office. Earlier this
year, the companies acquired Southern California Edison's 1,020 MW
gas-fired El Segundo Station and 530 MW gas-fired Long Beach
Generating facility. Dynegy and NRG each hold a 50% interest in
The Encina plant and associated combustion turbines will
increase the number of California power generation assets owned by
Dynegy to 21. Besides El Segundo and Long Beach, Dynegy has
gas-fueled cogeneration plants in Bakersfield, Corona, Crockett,
Stockton, and Taft. Encina and the combustion turbines will
increase Dynegy California generating capacity to 3,477 MW.
The Encina plant began operation in 1954 and consists of five
steam generating units. Other assets being sold along with the
plant are about 400 acres of surrounding land, including the outer
and middle sections of the Agua Hedionda Lagoon, an offshore marine
terminal, a 1.7 million barrel petroleum storage facility and an
on-site combustion turbine with a capacity of 14 MW. The sale also
includes 17 combustion turbines located throughout SDG&E's
service territory with a total capacity of 253 MW. The sale is
expected to close in 1Q99 and is subject to regulatory approvals.
Joe Fisher, Houston
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