Dynegy Clears Final Federal, State Hurdles for Sithe Acquisition
Dynegy Inc. last Monday said that FERC has approved the company's previously announced plans to purchase from Exelon Corp. all of the outstanding capital stock of ExRes SHC Inc., the parent company of Sithe Energies Inc. and Sithe Independence LP.
In addition, the New York State Public Service Commission (NYPSC) has ruled that it will not further review the transaction.
The FERC approval and the NYPSC ruling, received on Jan. 13 and Jan. 14, respectively, represent the final regulatory milestones in the approval process.
Dynegy in December announced that the Federal Trade Commission had allowed the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 to expire in connection with the transaction (see Power Market Today, Dec. 16, 2004). Dynegy expects the transaction to be completed in the first quarter 2005.
Through the acquisition of ExRes SHC, Dynegy will acquire Sithe Energies, which includes the 1,042 MW, 7,211 Btu heat rate, combined-cycle Independence power generation facility located near Scriba, NY, four natural gas-fired merchant facilities in New York and four hydroelectric generation facilities in Pennsylvania.
In addition to Sithe Energies, Dynegy will acquire Sithe Independence, which holds a 750 MW firm capacity sales agreement with Con Edison, a subsidiary of Consolidated Edison Inc. The capacity sales agreement, which runs through 2014, provides annual cash receipts of approximately $100 million.
Sithe Independence also holds power tolling and financial swap contracts with a subsidiary of Dynegy. While these contracts will remain in effect, the acquisition by Dynegy will transform the tolling and swap contracts into Dynegy intercompany agreements, substantially eliminating their financial impact by retaining the net cash flows within 100%-owned Dynegy companies.
The financial terms of the agreement include the payment by Dynegy of $135 million in cash and the consolidation of $919 million in face value project debt. The principal and interest payments related to the consolidated debt will be substantially funded through 2014 by the proceeds from the long-term capacity sales contract with Con Edison.
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