Dominion has agreed to purchase 100% of the interest in Mirant State Line Ventures Inc. from Mirant for about $182 million. The company’s assets include the 515 MW coal-fired State Line power station located near Hammond, IN, which serves the Chicago area. Dominion also will assume the power purchase agreement with the sole purchaser, Exelon, whose agreement expires in 2012.

The deal is expected to close in the second quarter subject to regulatory approval, and Dominion expects the acquisition to be immediately accretive to earnings. The purchase price of $182 million approximates the book value of the subsidiary on Mirant’s balance sheet at the end of 2001. There is no debt associated with the subsidiary.

Dominion CEO Thomas E. Capps said the transaction “represents an excellent opportunity for Dominion to significantly expand its generation fleet in the heart of our geographic area of focus. At the same time, it contributes additional fuel mix diversity, both to Dominion’s existing generation assets and to our new development projects.”

Capps said the State Line plant had “excellent operating fundamentals and a committed, experienced workforce.” With Dominion’s “track record of operating profitable coal-fired facilities — including the nearby Kincaid Power Station,” Capps said there will be additional value in the transaction. “The addition of our 13th coal-fired power station also makes use of an abundant natural resource that is an integral source of energy for the region. It complements our natural gas-fired facilities currently in operation and under development.”

Dominion’s acquisition includes State Line’s 197 MW Unit 3 and 318 MW Unit 4, both coal-fired units. The two units burn low-sulfur coal from the Powder River Basin in Wyoming. Exelon will continue to provide 100% of the coal for the units and transportation under terms of the power purchase agreement.

Dominion acquired State Line’s sister facility, the 1,108 MW coal- fired Kincaid Power Station near Springfield, IL, from Exelon in 1998. Dominion operates 11 other coal-fired generation facilities in Virginia and West Virginia.

Mirant has been in the process of selling off and canceling power projects in the wake of Enron Corp.’s bankruptcy. Mirant already has cut its 2002 earnings estimate to a range of $1.60 to $1.70 per share from a range of $1.90 to $2, citing lower margins and reduced business activity in North America. It also plans further cuts to its 2002 and 2003 capital budgets to a combined $2.9 billion from $5.9 billion, and plans to cut its expenses by $75 million in 2002 and $150 million in 2003. It also has said it will suspend construction of two power plants and warehouse turbines for two other projects (see NGI, Feb. 4).

“This sale would be yet another step in strengthening Mirant’s balance sheet and improving its liquidity,” said Marce Fuller, Mirant CEO. “Consistent with our announced business plan, Mirant will continue to pursue other asset sales.” Earlier this month, Mirant announced it had completed the sale of its 44.8% ownership stake in Bewag, a Berlin-based utility, resulting in more than $1 billion of net proceeds.

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