Citizens Power Sale Surprises Traders
In a move that surprised power traders last week, Peabody Group
sold its marketing subsidiary Citizens Power to merchant power
generator Edison Mission Energy for an undisclosed amount. Citizens
Power is ranked as the eighth largest power marketer in the United
States, and had trades totaling 92.3 million MWh last year. Edison
Mission, based in Irvine, CA, currently only trades power in the
Northeast, where it operates a 650 MW power plant in Homer City,
PA. That plant serves the PJM Interconnection and New York markets.
The transaction, which still needs FERC approval, is expected to
be completed this summer. Citizens is expected to remain in Boston,
but it will have its name changed, according to Edison Mission
Power traders were surprised by the sale, noting that there were
no rumors that Peabody wanted to sell its marketing subsidiary. But
company officials on both sides said the sale was beneficial to
"This acquisition gives us the capabilities required to maximize
our merchant power investment," said Alan Fohrer, chief executive
officer of Edison Mission. The acquisition will help Edison Mission
develop a 13,278 MW portfolio of U.S. generating facilities, he
Fohrer also noted that Edison Mission had developed a "strong
generation presence" in several of what he called the "most
attractive U.S. regional markets," and said these facilities now
will have the market knowledge, commercial skills and logistical
expertise to provide "exceptional competitive position."
Of the sale, Peabody Group Chairman and Chief Executive Officer
Irl F. Engelhardt said that it had "become clear" to his company
that as the markets evolved, "Citizens Power could more fully
utilize its excellent power marketing and risk management
expertise" by affiliating with a merchant electricity generator.
Citizens, which as the country's original power marketer had its
first sale in 1995, had been beneficial for Peabody to a point,
said Engelhardt, and had assisted Peabody in establishing a coal
and emissions trading group, along with improving its risk
management systems and customers' needs in the deregulated market.
Although terms of the sale were not revealed, Peabody's Vic Svec
said his company reflected the sale with an after-tax loss of $90
million in its fourth quarter, which ended March 31. In the report,
Citizens Power was left with a loss of $79.6 million in the
quarter, which cut Peabody's net income to $59 million, but still
put it ahead of its fiscal report of $25.1 million in 1999.
Svec noted that the Citizens Power loss included expected losses
on third-party power contract restructuring transactions, where
Citizens Power purchased long-term electricity supply contracts
through various utilities with independent power producers. Under
federal regulations, Citizens was committed to paying more for the
electricity produced under these contracts than it can get for the
power on the open market.
Edison Mission, an Edison International company, specializes in
development, acquisition, construction management and operation of
global power production facilities, and it owns nearly 23,000 MW of
generating capacity. Its interests include facilities in Australia,
Indonesia, Italy, New Zealand, Spain, Thailand, Turkey, the United
Kingdom and the United States.
Carolyn Davis, Houston