CalEnergy Co. Inc. and MidAmerican Energy Holdings Co. formallyclosed their merger Friday, marking the first time that anindependent power producer has acquired a traditional gas andelectric utility. The Iowa Utilities Board’s (IUB) recent approvalof the deal cleared the way for it to be completed.

Also clearing the merger path was CalEnergy’s completion of thesale of various ownership interests in qualifying facilities, whichFERC ordered in December as part of its decision approving themerger. CalEnergy sold half of its ownership interest in CEGeneration LLC, the holding company for its 14 U.S. generatingfacilities, to El Paso Energy, and all of its ownership interestsin its Coso geothermal power projects to Caithness Energy LLC.

Notably, the merger transaction combines a leading regionalprovider of electricity and natural gas to 1.3 million customers inIowa and neighboring states (MidAmerican) with a global energy firmthat manages and owns power generation facilities and other energyassets in the United States, Europe and elsewhere, and distributeselectricity and gas to 2 million customers in the United Kingdom(CalEnergy).

Des Moines, IA-based MidAmerican brings its knowledge of theU.S. utility market to the new company, while CalEnergy willcontribute its expertise about operating a gas and electric utilityin the U.K.’s deregulated environment, as well as its “aggressivegrowth” in global energy markets, the merger partners said.

“We think it [the merger] really does mark a new chapter in thecompetitive energy field both in the United States and around theworld,” said David L. Sokol, chairman and CEO of the new combinedenergy company, which will be called MidAmerican Energy Holdings.He noted the merger transaction, which was first proposed lastAugust, was closed faster than any other electric utility deal everin the nation and at a lower price than it initially had expectedto pay – about $166 million less. Sokol had been chairman and CEOof CalEnergy.

Through its experiences with electricity deregulation in theU.K., CalEnergy “will help with the underlying processes and bringsystems 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 than3.3 million utility customers in the U.S. and U.K., and has 41generating facilities with 10,000 MWs of capacity worldwide. Inaddition to its utility supply and distribution business in theU.K., CalEnergy owns geothermal facilities, gas-fired cogenerationfacilities, is involved in gas exploration in the North Sea, andproduces hydroelectric power. MidAmerican, on the other hand, ownsthe largest utility in Iowa, MidAmerican Energy, and is involved ingas marketing, as well as a number of non-energy relatedbusinesses.

Under the merger deal, CalEnergy paid $27.15 for eachoutstanding common share of MidAmerican Energy stock, for a totalof about $2.25 billion. MidAmerican was to be folded intoCalEnergy, which has been re-incorporated in Iowa and re-namedMidAmerican Energy Holdings. CalEnergy previously was incorporatedin Omaha, NE. The new company becomesthe largest publicly heldcompany in Iowa. No layoffs are anticipated as a result of themerger, Sokol said.

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

Susan Parker

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