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Edison International Buying ComEd Power Plants for $5 B

Edison International Buying ComEd Power Plants for $5 B

Edison International's wholly-owned independent power subsidiary will acquire all the fossil-fuel generating assets of Commonwealth Edison. The company will pay about $5 billion for a package of coal and gas-fired plants with total capacity of 9,772 megawatts (MW). Edison Mission Energy has also committed to build 500 MW of gas-fired generating capacity in Chicago.

John E. Bryson, CEO of Edison International, parent of Southern California Edison, said the plants have excellent access to attractive markets in the Midwest and will continue to serve northern Illinois. "These assets represent some of the most competitive generation in the region. The acquisition complements the recent acquisition of the Homer City Generating station in the Mid-Atlantic region, giving us a strong generation presence across the United States."

The sale properties include six coal-fired plants that together have 5,645 MW of capacity, and Collins Station in Morris, IL, which has 2,698 MW of capacity and runs on natural gas or oil. The nine peaking units to be sold have a combined capacity of 1,429 MW, are fueled by either gas or oil and are located at nine ComEd sites in Chicago (three locations), Waukegan, Joliet, Lombard, Rockford, Eola, and South Chicago Heights. The plants range in age from 21 to 47 years old; most having been built in the late 1950s and early '60s.

ComEd parent Unicom got about $1.76 billion over book value for the plants combined. The sale will enable Unicom to improve its financial structure and redirect investments, said Unicom and Commonwealth Edison CEO John W. Rowe. The gain of about $1.7 billion after taxes and satisfaction of sales-related obligations will be used to reduce the cost of ComEd's nuclear-related assets, currently valued at more than $9 billion. "This will provide a more competitive balance sheet as we make a transition to an open market for the generation and sale of electricity, as mandated by the 1997 Illinois Restructuring Act," Rowe said.

Some sale proceeds will enhance ComEd's transmission and distribution (T&D) system. "We expect to spend close to $4 billion over the next five years on T&D to ensure our customers have a first-class delivery system," Rowe said. Proceeds also will be used along with normal operating revenues to support the company's continuing improvement of its nuclear fleet and to provide a foundation for growth in other business opportunities.

After the sale, ComEd will retain power purchase agreements with Edison Mission Energy enabling it to access output of the plants for the next five years to serve its customers. In addition, Edison Mission Energy will have substantial incentives to improve the reliability of the plants in the form of increased payments for better performance, especially in the high-demand summer months.

Headquartered in Rosemead, CA, Edison International subsidiary Edison Mission yesterday also paid $650 million for a 40% stake in a New Zealand state-owned electricity and gas company called Contact Energy. The price is a hefty premium relative to analyst expectations.

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