El Paso Sells Cedar Brakes to Bear Stearns, Transfers Supply Pact to Constellation
El Paso Corp. took several more steps last Wednesday in its effort to sell its domestic power portfolio and reduce its debt. The company said it is selling interests in its Cedar Brakes I and II power companies, which supply Public Service Electric and Gas Co., to Bear Stearns affiliate Arroyo Energy Investors LP for $106 million.
In conjunction with that transaction, El Paso Marketing also will transfer its obligations to supply power to the Cedar Brakes I and II entities to Constellation Energy Commodities Group Inc. and will terminate a group of offsetting trades with Constellation, resulting in a cost to El Paso of $240 million.
The equity sale will eliminate $575 million of associated non-recourse debt from El Paso's balance sheet, but it will result in a book loss of $222 million, and there will also be a recognition of a loss on the transfer of the contracts to Constellation, El Paso said.
The Cedar Brakes I and II entities were created as part of El Paso's power restructuring business under which the company restructured above-market, long-term power purchase agreements originally tied to certain older power plants. However, El Paso is no longer engaged in restructuring power purchase contracts.
The power supply contract associated with the Cedar Brakes I power purchase agreement requires the delivery of about 856,000 MWh per year of power through August 2013. The power supply contract associated with the Cedar Brakes II power purchase agreement requires the delivery of about 1.5 million MWh/year through 2008, with a reduction to about 1.2 million MWh/year through March 2013. The transaction is expected to close in the first quarter of 2005 and is subject to FERC approval. http://www.elpaso.com
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