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MidAmerican, CalEnergy Get IUB Nod, Close Merger

MidAmerican, CalEnergy Get IUB Nod, Close Merger

CalEnergy Co. Inc. and MidAmerican Energy Holdings Co. formally closed their merger Friday, marking the first time that an independent power producer has acquired a traditional gas and electric utility. The Iowa Utilities Board's (IUB) recent approval of the deal cleared the way for it to be completed.

Also clearing the merger path was CalEnergy's completion of the sale of various ownership interests in qualifying facilities, which FERC ordered in December as part of its decision approving the merger. CalEnergy sold half of its ownership interest in CE Generation LLC, the holding company for its 14 U.S. generating facilities, to El Paso Energy, and all of its ownership interests in its Coso geothermal power projects to Caithness Energy LLC.

Notably, the merger transaction combines a leading regional provider of electricity and natural gas to 1.3 million customers in Iowa and neighboring states (MidAmerican) with a global energy firm that manages and owns power generation facilities and other energy assets in the United States, Europe and elsewhere, and distributes electricity and gas to 2 million customers in the United Kingdom (CalEnergy).

Des Moines, IA-based MidAmerican brings its knowledge of the U.S. utility market to the new company, while CalEnergy will contribute its expertise about operating a gas and electric utility in the U.K.'s deregulated environment, as well as its "aggressive growth" in global energy markets, the merger partners said.

"We think it [the merger] really does mark a new chapter in the competitive energy field both in the United States and around the world," said David L. Sokol, chairman and CEO of the new combined energy company, which will be called MidAmerican Energy Holdings. He noted the merger transaction, which was first proposed last August, was closed faster than any other electric utility deal ever in the nation and at a lower price than it initially had expected to pay - about $166 million less. Sokol had been chairman and CEO of CalEnergy.

Through its experiences with electricity deregulation in the U.K., CalEnergy "will help with the underlying processes and bring systems that will allow us to facilitate competition in Iowa," noted Greg Abel, president and COO of the new company.

The combined company has estimated assets of $11 billion, expects revenues of about $4.6 billion in 1999, serves more than 3.3 million utility customers in the U.S. and U.K., and has 41 generating facilities with 10,000 MWs of capacity worldwide. In addition to its utility supply and distribution business in the U.K., CalEnergy owns geothermal facilities, gas-fired cogeneration facilities, is involved in gas exploration in the North Sea, and produces hydroelectric power. MidAmerican, on the other hand, owns the largest utility in Iowa, MidAmerican Energy, and is involved in gas marketing, as well as a number of non-energy related businesses.

Under the merger deal, CalEnergy paid $27.15 for each outstanding common share of MidAmerican Energy stock, for a total of about $2.25 billion. MidAmerican was to be folded into CalEnergy, which has been re-incorporated in Iowa and re-named MidAmerican Energy Holdings. CalEnergy previously was incorporated in Omaha, NE. The new company becomes the largest publicly held company in Iowa. No layoffs are anticipated as a result of the merger, Sokol said.

Stanley Bright, who had been chairman, president and CEO of MidAmerican, has been named vice chairman of the board and a member of its executive committee.

Susan Parker

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