Commonwealth Edison (ComEd) parent Unicom received about $1.76billion over book value last week in the largest divestiture yet ofa utility’s fossil-fueled power plants. Edison International’sindependent power subsidiary is buying 9,772 MW of ComEd’s coal-and gas-fired baseload and peaking plants for $5 billion.

The deal will give Edison Mission Energy a huge foothold in oneof the nation’s most “attractive” power markets – the Midwest,where generation fuel will become increasingly more abundant in thenext few years and power sales are likely to continue capturing alarge premium during the hot summer months. Edison also hascommitted to build another 500 MW of gas-fired generating capacityin Chicago.

John E. Bryson, CEO of Edison International, parent of SouthernCalifornia Edison, said the plants have excellent access toattractive markets in the Midwest and will continue to servenorthern Illinois. “These assets represent some of the mostcompetitive generation in the region. The acquisition complementsthe recent acquisition of the Homer City Generating station in theMid-Atlantic region, giving us a strong generation presence acrossthe United States.”

The sale properties include six coal-fired plants that togetherhave 5,645 MW of capacity, and Collins Station in Morris, IL, whichhas 2,698 MW of capacity and runs on natural gas or oil. The ninepeaking units to be sold have a combined capacity of 1,429 MW, arefueled by either gas or oil and are located at nine ComEd sites inChicago (three locations), Waukegan, Joliet, Lombard, Rockford,Eola, and South Chicago Heights. The plants range in age from 21 to47 years old; most having been built in the late 1950s and early’60s.

The sale will enable Unicom to improve its financial structureand redirect investments, said Unicom and Commonwealth Edison CEOJohn W. Rowe. The gain of about $1.7 billion after taxes andsatisfaction of sales-related obligations will be used to reducethe cost of ComEd’s nuclear-related assets, currently valued atmore than $9 billion. “This will provide a more competitive balancesheet as we make a transition to an open market for the generationand sale of electricity, as mandated by the 1997 IllinoisRestructuring Act,” Rowe said.

Some sale proceeds will enhance ComEd’s transmission anddistribution (T&ampD) system. “We expect to spend close to $4billion over the next five years on T&ampD to ensure our customershave a first-class delivery system,” Rowe said. Proceeds also willbe used along with normal operating revenues to support thecompany’s continuing improvement of its nuclear fleet and toprovide a foundation for growth in other business opportunities.

After the sale, ComEd will retain power purchase agreements withEdison Mission Energy enabling it to access output of the plantsfor the next five years to serve its customers. In addition, EdisonMission Energy will have substantial incentives to improve thereliability of the plants in the form of increased payments forbetter performance, especially in the high-demand summer months. The sale still must pass state and federal regulatory approvals.

Joe Fisher, Houston

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