In their sixth asset alliance, NRG Energy Inc. and Dynegy Inc.are expanding their co-owned generation portfolio in the westernUnited States by purchasing one power plant and buying most of thegenerating capacity of another plant from Nevada Power Co. for $634million. Minneapolis-based NRG will be operator and Houston-basedDynegy will serve as power marketer and fuel supplier.

The deal includes the 740 MW gas-fired Clark Generating Stationand 590 MW of the 605 MW coal-fired Reid Gardner GeneratingStation. Already, NRG and Dynegy jointly own 2,768 MW of powergeneration facilities in California, and 350 MW in Illinois.

Nevada Power, a unit of the holding company Sierra PacificResources, based in Reno, also agreed to a transitional power purchaseagreement to buy power from the plants until March 1, 2003. The salewas required by regulators when they approved Sierra Pacific’spurchase of Nevada Power (see Daily GPI, March 8; Oct.12, 1998). The plants now supply power to Las Vegas.

“Acquiring the Reid Gardner and Clark stations expands ouralready strong relationship with Dynegy and furthers NRG’s strategyof building a top three position in its primary markets,” saidDavid H. Peterson, NRG CEO. “This acquisition improves ourpartnership’s position in the western region by adding a strongcomponent of baseload generation to the portfolio.”

Dynegy CEO Chuck Watson said that the addition will increase thecompany’s generating capacity by more than 4,000 gross MW, “whichis comparable to many industry mergers without the regulatedtransmission and distribution.” Watson said the acquisition liftsDynegy’s earnings forecast for 2001 to $1.75 to $1.80 per share.

Analyst James Yannetto of UBS Warburg LLC called the purchase”the latest example of the successful execution of Dynegy’s’laser-like accuracy’ capacity addition/diversification strategy.”He said the assets were ideally located in the high growth westernUnited States with “clear access to California,” and had”multi-fuel capabilities,” to help round out the companies’ peakingportfolio.

The Clark Generating Station in southeastern Las Vegas consistsof 10 gas- and oil-fired generating units, with natural gas as theprimary fuel. The Reid Gardener station, 52 miles northeast of LasVegas, has four baseload coal-fired units, three with 110 MW each,which are wholly owned by Nevada Power. Nevada Power and theCalifornia Department of Water Resources (CDWR) jointly own thefourth unit, a 275 MW coal-fired unit.

NRG and Dynegy will jointly acquire Nevada Power’s combinedownership, and use interest in the fourth unit as part of thetransaction. The CDWR will maintain its 15 MW ownership interest inthe unit.

The Reid Gardner and Clark Stations are among the seven assetbundles included in an auction started by Sierra Pacific earlierthis year. Last month, NRG was named as the successful bidder forSierra Pacific’s 50% interest in the 522 MW coal-fired North ValmyGenerating Station and 100% interest in the 25 MW of peaking unitsin northern Nevada. Nevada Power and Sierra Pacific intend tocomplete the sale and transfer of the remaining generation assetsin 2001.

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