Denver-based KN Energy (KNE) made a big entrance into thegas-fired power generation business yesterday by purchasing 10% ofthe generation in the state of Colorado and becoming the largestindependent power producer in the state. It purchased Denver-basedThermo Co., an electrical engineering firm that specializes indistributed power. The deal is designed to prepare KNE for eventualelectric industry deregulation and competition in its home state.
The purchase includes a majority stake in gas-fired power plantswith 380 MW of generation capacity and 130 Bcf of gas reserves. KNEsaid it may expand the plants, which consist of two cogenerationfacilities in Fort Lupton, CO, totaling 272 MW; the 32 MW GreeleyPlant in Greeley, CO, and the 76 MW UNC Plant, located at theUniversity of Northern Colorado in Greeley. The power generated bythe plants is sold under long-term contracts to Public Service Co.of Colorado.
Thermo also brings considerable engineering experience that KNEintends to utilize in constructing new power plants along its27,000 miles of gas pipeline in 16 states. “We will be able toleverage the expertise and experience of Thermo to augment andprovide new markets for our growing natural gas transportation anddistribution businesses,” said CEO Larry Hall, indicating newpower projects might be combined with new pipeline expansions andexisting pipeline projects, such as KNE’s proposed Front RunnerPipeline in Colorado.
The purchase of the Thermo units will be financed with aninitial payment of $35 million in KN Energy common stock, and theremainder of the purchase price will be paid in common stock andcash in 1999 and 2000. KNE would not disclose the full purchaseprice, but a source said it was less than $400 million.
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