In a move that surprised power traders last week, Peabody Groupsold its marketing subsidiary Citizens Power to merchant powergenerator Edison Mission Energy for an undisclosed amount. CitizensPower is ranked as the eighth largest power marketer in the UnitedStates, and had trades totaling 92.3 million MWh last year. EdisonMission, based in Irvine, CA, currently only trades power in theNortheast, where it operates a 650 MW power plant in Homer City,PA. That plant serves the PJM Interconnection and New York markets.

The transaction, which still needs FERC approval, is expected tobe completed this summer. Citizens is expected to remain in Boston,but it will have its name changed, according to Edison Missionofficials.

Power traders were surprised by the sale, noting that there wereno rumors that Peabody, primarily a coal company, wanted to sellits marketing subsidiary. But company officials on both sides saidthe sale was beneficial to both parties.

“This acquisition gives us the capabilities required to maximizeour merchant power investment,” said Alan Fohrer, chief executiveofficer of Edison Mission, an unregulated affiliate of SouthernCalifornia Edison. The acquisition will help Edison Mission developa 13,278 MW portfolio of U.S. generating facilities, he said.

Fohrer also noted that Edison Mission had developed a “stronggeneration presence” in several of what he called the “mostattractive U.S. regional markets,” and said these facilities nowwill have the market knowledge, commercial skills and logisticalexpertise to provide “exceptional competitive position.”

Of the sale, Peabody Group Chairman Irl F. Engelhardt said thatit had “become clear” that as the markets evolved, “Citizens Powercould more fully utilize its excellent power marketing and riskmanagement expertise” by affiliating with a merchant electricitygenerator.

Citizens, which as the country’s original power marketer had itsfirst sale in 1995, had been beneficial for Peabody to a point,said Engelhardt, and had assisted Peabody in establishing a coaland emissions trading group, along with improving its riskmanagement systems in the deregulated market.

Although terms of the sale were not revealed, Peabody’s Vic Svecsaid his company reflected the sale with an after-tax loss of $90million in its fourth quarter, which ended March 31. Citizens Powerwas left with a loss of $79.6 million in the quarter, which cutPeabody’s net income to $59 million.

Svec noted that the Citizens Power loss included expected losseson third-party power contract restructuring transactions, whereCitizens Power purchased long-term electricity supply contractsthrough various utilities with independent power producers. Underfederal regulations, Citizens was committed to paying more for theelectricity produced under these contracts than it can get for thepower on the open market.

Edison Mission, an Edison International company, specializes indevelopment, acquisition, construction management and operation ofglobal power production facilities, and it owns nearly 23,000megawatts of generating capacity. Its interests include facilitiesin Australia, Indonesia, Italy, New Zealand, Spain, Thailand,Turkey, the United Kingdom and the United States.

Peabody has no plans to sell its coal and emissions tradinggroup, Peabody Coal Trading, at this time, according to Svec.Peabody’s coal mines in the United States and Australia fuel morethan 9% of all U.S. electricity, and 2.5% of electricity worldwide.

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