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Germany's STEAG AG Joins Avista in U.S. Power Market

Germany's STEAG AG Joins Avista in U.S. Power Market

Avista Corp. affiliate Avista Power and STEAG AG, Germany's largest independent power producer agreed to form a joint venture to develop, build and/or buy electric generation assets throughout North America. Initial regions of interest include the Northwest, the Southwest and the Southeast. Projects of interest include those powered by natural gas, coal and hydro.

STEAG will buy a 50% interest in Avista Power to effect the partnership and invest jointly with Avista in future projects. STEAG also secured an option to purchase a minority interest in Avista Corp. marketing and trading affiliate Avista Energy.

Avista and STEAG AG will have equal ownership in Avista Power, which was formed to develop, build and buy generation facilities to serve wholesale power markets throughout Canada and the United States directly and in support of Avista Energy trading and marketing activities.

The partnership is STEAG AG's first foray into the U.S. energy market, and the company will establish a U.S. subsidiary.

"Avista Power blends Avista Corp.'s established success in the national energy business (through affiliate Avista Energy) with STEAG's extensive worldwide experience in the design, construction, financing and operation of electric generating plants (through STEAG IPP International)," said T.M. Matthews, Avista Corp. CEO. "This will also strengthen Avista Power's previously announced venture with Cogentrix Energy Inc., and will strengthen Avista Energy as STEAG exercises its purchase option."

Avista Power has two projects in development. The first project, a 270 MW gas-fired combined cycle combustion turbine in Rathdrum, ID, was announced in December. Co-owned by Avista Power and Cogentrix Energy Inc. of Charlotte, NC, construction of this plant is scheduled to begin in the third quarter with commercial operation expected in the third quarter of 2001. The second project, a 120 MW gas-fired combined cycle combustion turbine in Lordsburg, NM, was announced earlier this month. Construction is expected to begin this year with commercial operation in 2000. Avista Energy will act as fuel manager and power marketer for the electric generation facilities owned by Avista Power.

Avista Corp. owns/operates 11 generating plants (hydro, wood waste, coal, and gas) in the Northwest with about 1,600 MW of capacity. STEAG AG, through its IPP International division, owns and operates eight plants (mostly coal) with 5,439 MW of capacity. STEAG, with annual revenues of more than US$2 billion, is headquartered in Essen, Germany and is a diversified group of companies with international operations channeled through three corporate divisions: Power Generation, IPP International and Electronic Systems/Process Technology.

Joe Fisher, Houston

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