AEP, Alfa Sell Joint Stake in Mexican Cogeneration Plant
American Electric Power and Mexican conglomerate Alfa S.A. de C.V. are selling off their jointly owned Enertek Cogeneration Facility located in the northern part of Mexico in Altamira, Tamaulipas to frequent Mexican investor Iberdrola of Madrid, Spain for an undisclosed amount. Iberdrola, which has announced plans to pump up its Mexican energy investments, closed the deal June 30.
Columbus, OH-based AEP's subsidiary CSW International and Alfa each owned a 50% stake in the 120 MW natural gas-fired simple-cycle cogeneration facility, which serves the Altamira industrial complex. The plant, which began commercial operations in 1998, supplies about 820,000 pounds of steam an hour that is used to power the industrial complex as well as users in northern and central Mexico. Enertek was the first large cogeneration facility in Mexico with long-term gas supply and transmission services contracts.
"AEP is pleased to have been partners with Alfa in pioneering the development of cogeneration projects in Mexico," said Dwayne L. Hart, AEP Energy Services vice president. "The sale of Enertek is consistent with our strategy of maximizing the value of our asset portfolio through acquisitions, divestitures and potential joint ventures." He called the Enertek sale part of AEP's "value creation process."
Although neither AEP nor Alfa disclosed terms of the deal, AEP plans to use its proceeds to pay down its debt, and said that the sale also represents a one-time gain of approximately three cents per share on its stock. Mexican conglomerate Alfa, which has steel, food and auto parts businesses throughout the country, said it would use the sale's proceeds to pay down its debt by about $70 million.
Spanish-based Iberdrola has been increasing its stake in Mexico's energy businesses and is now the leading foreign generation company there. In June, Iberdrola and Spanish utility Union Fenosa announced they would invest $4 billion into Mexican power projects in the coming years. Iberdrola already has nearly 2,000 MW under construction in Mexico, and plans to increase its stake to 5,000 MW in the next four years.
In its largest project, Iberdrola has a 1,000 MW facility under construction in Monterrey, where Alfa is headquartered. The facility includes 570 MW for the Mexican-owned power utility, Comision Federal de Electricidad (CFE), and another 388 MW for Alfa and Planta Electrica Grupo Industrial SA (PEGI). PEGI is an industrial association, which has an independent distribution network in the region.
Spanish Prime Minister Jose Maria Aznar visited Mexico last week, pushing his country's investment and export sales. He met with several of Mexico's leading industrial leaders last Tuesday, stressing his country's support for Mexico's new government, which took over last November. In 2000, Spanish companies invested almost $1.57 billion in Mexico, with Iberdrola and Union Fenosa energy investments leading the way.
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