Consumers Energy, the principal subsidiary of CMS Energy, has reached an agreement to sell the utility’s interests in the 1,500 MW Midland Cogeneration Venture power plant to GSO Capital Partners and Rockland Capital Energy Investments for $60.5 million.
Consumers Energy owns 49% of the MCV Partnership, which leases and operates the facility near Midland, MI. Consumers Energy also indirectly owns 35% of the facility and along with the other owners leases the facility to the MCV Partnership.
Sustained high natural gas prices led the MCV Partnership to reevaluate the economics of the facility last year, the company noted. Those high gas prices also led Consumers Energy to examine several long-term alternatives for its MCV interests, including a competitive sale.
The sales agreement calls for GSO and Rockland to purchase all of the Michigan utility’s interests. GSO and Rockland also will provide Consumers Energy a financial guarantee to back certain contingent obligations.
Consumers Energy is the main customer for the plant’s electricity output. The utility’s contract to purchase power from the plant, and the associated customer rates, are not affected by the sale.
The sale is the result of a competitive process. Proceeds from the sale will be used to reduce debt at the utility, following a review by the Michigan Public Service Commission.
CMS Energy said if the sale closes this fall, as expected, it would boost 2006 cash flow by about $56 million and reduce 2006 reported and adjusted earnings by about 4 cents per share. The company said it is maintaining its guidance for 2006 adjusted earnings, excluding mark-to-market impacts, of about $1 per share. CMS Energy does not provide specific reported earnings guidance because of the uncertainties associated with the expected reversal of mark-to-market gains and losses from potential asset sales.
The natural gas-fired MCV facility can produce up to 1,500 MW of electricity and up to 1.35 million pounds per hour of industrial steam. It began commercial operation in 1990.
J.P. Morgan Securities Inc. served as financial advisor for Consumers Energy and managed the competitive sale process.
Earlier this month, Entergy Corp. and Consumers Energy disclosed that they had reached an agreement for Entergy to purchase the 798 MW Palisades nuclear plant near South Haven, MI, for $380 million.
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