El Paso Energy Merchant domestic power portfolio is down to nearly nothing, after the company announced Friday its plans to sell 25 of its U.S. generation facilities to Northern Star Generation LLC for $746 million and the assumption of $174 million of debt. The El Paso Corp. facilities are located in seven states and have a net capacity of 1,850 MW.

Northern Star is a unit of AIG Global Investment Group, which is acquiring the assets on behalf of private equity funds, affiliated companies and third party clients. An AIG subsidiary provided the funding.

AIG CEO Win Neuger said the power plants “comprise stable long-term cash flows principally with investment grade-rated utilities.” He added that AIG’s financial strength would give it the ability to provide an “attractive upside” for the assets.

Doug Foshee, El Paso’s CEO, called the sale “a major step in the execution of our long-range plan.” He noted that El Paso has announced or closed $2.3 billion of the $3.6-3.9 billion targeted under its asset sales plan, “and we expect additional progress in the first quarter.”

El Paso announced last year that it would exit the power business to concentrate on its core natural gas pipeline and production businesses (see Daily GPI, Dec. 16, 2003). The latest transaction represents a “significant” portion of the company’s U.S. power portfolio, the company said. An asset sales tracking report is available on the company’s web site, at www.elpaso.com under the investor relations resources section.

The transaction is expected to close during the second quarter of 2004. The sale is subject to customary regulatory conditions; proceeds will be used for debt repayment and general corporate purposes. Lehman Brothers advised AIG, while Banc of America Securities LLC served as El Paso’s adviser.

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