Continuing with its aggressive move into the power sector, the Goldman Sachs Group Inc. last Monday said that it has agreed to acquire 100% of the stock of Cogentrix Energy Inc., a privately-held independent power producer based in Charlotte, NC.

The Cogentrix transaction, valued at $2.4 billion, adds 26 plants with 3,300 MW of generation capacity to the Goldman Sachs portfolio. The vast majority of Cogentrix’ output is sold under long-term contracts to established, investment grade electric utilities, the company said. Analysts were calling the purchase a “sure thing” based on the average contract life for the plants’ output of 16 years. Many of the plants are qualifying facilities (QF), which are guaranteed payment at a utility’s “avoided costs.”

“The Cogentrix portfolio of assets represents an attractive opportunity to further develop our power business through the acquisition of high-quality generation facilities with stable, long-term cash flows,” said Richard Ruzika, co-head of global commodities at Goldman Sachs.

While the power plants have value, “it is dwarfed by the value of the contracts,” said Doug Kimmelman in the Goldman Sachs commodities group.

In addition to taking over the long-term debt of the projects, the purchase is expected to yield about $115 million to Cogentrix.

“This transaction creates a combination of generation asset management and commodity trading capabilities that we believe is unique in the electric power marketplace. I am confident that Cogentrix’ tradition of excellence will endure as we join forces with Goldman Sachs, and that the Lewis family legacy is in good hands,” said James Lewis, CEO of Cogentrix.

George Lewis, Jr., founder and chairman-emeritus of Cogentrix Energy Inc., died last week after an extended illness. Lewis built Cogentrix into an independent private electric power producer with more than $640 million in annual revenues and ownership interests in 27 facilities in fourteen states and the Dominican Republic. He retired as the company’s CEO in August 1995.

A plan by Aquila to merge with Cogentrix was cancelled a little over a year ago when Aquila’s fortunes were falling.

The transaction with Goldman Sachs is subject to regulatory approval and is expected to close early in 2004.

In another action a Goldman Sachs subsidiary completed the purchase last week of El Paso Corp.’s interests in East Coast Power LLC for $456 million. GS Linden Power Holdings LLC paid El Paso Merchant Energy $380 million for the assets at closing. It will release another $70 million plus interest when the Federal Energy Regulatory Commission confirms a settlement recently filed by trial staff and other parties, which El Paso expects within a few months.

East Coast Power owns the natural gas-fired, 940 MW Linden cogeneration facility located adjacent to Staten Island in Linden, NJ. The facility supplies contracted power to the New York City market and a refinery owned by ConocoPhillips. The sale of East Coast Power also includes the rights to additional generation and transmission development opportunities at the Linden site.

Another Goldman Sachs subsidiary, J. Aron & Co., paid approximately $354 million last month to Allegheny Energy Supply Co. LLC and Allegheny Trading Finance for an energy supply contract with the California Department of Water Resources along with associated hedge transactions.

The investment conglomerate has been a major power trader for eight years.

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