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Dynegy, NRG Buying SDG&E Generation

Dynegy, NRG Buying SDG&E Generation

San Diego Gas &amp Electric (SDG&ampE) completed divestiture of all its fossil-fueled generation with the selection of Dynegy Inc. and NRG Energy Inc. as the joint winning bidder for its 951 MW Encina Power Plant in Carlsbad, CA.

Dynegy and NRG Energy will pay $356 million in cash to acquire both the plant and 17 combustion-turbine generators, which are used during times of peak electricity load. The sales price of $356 million is 3.8 times the book value of the assets as of Dec. 31, 1997 and represents total generation of 1,218 MW.

"This acquisition clearly aligns with our corporate strategy to maintain our leadership in the Btu convergence business by continuing to expand our energy portfolio," said Chuck Watson, Dynegy CEO. "The Encina Power Plant and combustion turbines will increase Dynegy's power generation and asset base in a growing competitive marketplace, strengthening our ability to provide innovative solutions for our customers. Dynegy will continue to capitalize on opportunities to integrate generation assets with our marketing and trading capabilities throughout North America."

"This sale will go a long way toward helping us fully recover our transition costs, which will provide direct and immediate benefits to both our shareholders and customers," said Edwin A. Guiles, president of SDG&ampE. "This sale also marks the end of a chapter in SDG&ampE's storied history, completing the divestiture of all our fossil-fueled generating assets. SDG&ampE now has a core focus of becoming a world-class energy delivery company."

Proceeds from the sale of the Encina plant will be applied to reduce the Competition Transition Charge (CTC) SDG&ampE customers pay. Under state law, Dynegy and NRG Energy will be required to contract with SDG&ampE for at least two years for the continued operation and maintenance of the Encina plant and the combustion turbines.

Dynegy will provide fuel management services and market energy out of the Encina Power plant and combustion turbines for the partnership. NRG will manage the operation of the power generation assets out of its newly established San Diego office. Earlier this year, the companies acquired Southern California Edison's 1,020 MW gas-fired El Segundo Station and 530 MW gas-fired Long Beach Generating facility. Dynegy and NRG each hold a 50% interest in both.

The Encina plant and associated combustion turbines will increase the number of California power generation assets owned by Dynegy to 21. Besides El Segundo and Long Beach, Dynegy has gas-fueled cogeneration plants in Bakersfield, Corona, Crockett, Stockton, and Taft. Encina and the combustion turbines will increase Dynegy California generating capacity to 3,477 MW.

The Encina plant began operation in 1954 and consists of five steam generating units. Other assets being sold along with the plant are about 400 acres of surrounding land, including the outer and middle sections of the Agua Hedionda Lagoon, an offshore marine terminal, a 1.7 million barrel petroleum storage facility and an on-site combustion turbine with a capacity of 14 MW. The sale also includes 17 combustion turbines located throughout SDG&ampE's service territory with a total capacity of 253 MW. The sale is expected to close in 1Q99 and is subject to regulatory approvals.

Joe Fisher, Houston

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ISSN © 2577-9877 | ISSN © 1532-1266
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