NRG Adds 1,081 MW Of Capacity With Conectiv Plant Purchases
Looking to establish a foothold in the PJM market, NRG Energy last Monday announced that it has acquired 1,081 MW of baseload electric generating plants from Delmarva Power and Light, a subsidiary of Conectiv. As part of the agreement, NRG entered into both short- and long-term purchase power contracts with Delmarva Power to provide energy and capacity for the Delmarva Peninsula.
"We are pleased to have a strong presence in the PJM market -- a vibrant, relatively mature and well-functioning market for electricity," said David H. Peterson, CEO of NRG Energy. "This acquisition gives us a strong base from which to expand into a top three generator in this market."
The generating facilities acquired earlier this month include those owned by Delmarva Power. The assets include the Indian River and Vienna generating stations and a partial interest in the Keystone and Conemaugh stations. A parcel of land in Dorchester County, MD, was also included in the purchase. Excluding inventory adjustments and other items, Conectiv received approximately $630 million in cash for the plants. An after-tax gain of around $170 million to $175 million is expected to be recognized in Conectiv's second quarter 2001 earnings as a result of the sales. Proceeds are expected to be used by Conectiv to repay debt and to fund the company's mid-merit construction program.
Conectiv will retain approximately 2,000 MW of mid-merit and peaking generation in the PJM power pool as part of the company's strategic focus on the "mid-merit" generation market in the mid-Atlantic region. Conectiv is making a push to establish a market-leading position in the mid-merit segment, with the goal of adding a total of 4,000 MW of mid-merit generation by 2004. The company's mid-merit power plants come on line quickly and produce electricity when demand is high and can be stopped quickly when demand drops. Along with the retention of 2,000 MW of mid-merit generation, Conectiv is currently well into a $300 million, 550 MW expansion of its Hay Road plant. The first combustion turbine at that plant, which will produce 116 MW, began commercial operation in early June.
"Our decision to concentrate on mid-merit plants, such as the Hay Road expansion project, coupled with the power purchase arrangements we have put in place all mean one thing for Conectiv customers -- a steady and reliable supply of electricity into the future," said Conectiv President Tom Shaw.
NRG has extended its signed purchase agreement for an additional 794 MW of assets it intends to acquire from Atlantic City Electric Co., a Conectiv subsidiary. These assets include the BL England and Deepwater generating stations, as well as additional partial ownership interests in the Conemaugh and Keystone stations. NRG expects to receive New Jersey Board of Public Utilities approval in the third quarter 2001 for the purchase of these assets. Previously disclosed earnings guidance of $1.35 per share remains unchanged.
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