br>The UK's PowerGen PLC Friday said it has reached an agreement with Dominion Resources Inc., Richmond, Va., and ESBI Engineering (UK) Ltd. for the purchase of shares and related assets in Corby Power Ltd.
After the transaction is completed, Corby Power will be owned 50% by PowerGen and 50% by ESBI. Presently, Dominion owns an 80% stake in Corby Power Ltd. ESBI owns the other 20% of the equity in Corby Power and also operates the plant. Corby Power will retain its existing project debt of approximately $220 million, Dominion said.
The planned sale of Corby advances Dominion's strategy of divesting noncore assets and focusing resources on energy markets in the US Midwest, Northeast, and Mid-Atlantic states, said CEO Thomas E. Capps.
PowerGen's net consideration will be �32.8 million, which will be paid from existing financing facilities. The acquisition is expected to contribute to PowerGen's earnings beginning in 2001. The Corby Power power station, Northamptonshire, was commissioned in 1994.
PowerGen said the transaction will not change its exposure to electricity price risk in England and Wales, given the existence of a long-term electricity contract. Corby Power does not set pool prices, and the transaction will have no effect on liquidity in the electricity wholesale market, the company said.
All three companies reported the transaction, still subject to various regulatory approvals, is expected to ease the transition to the new electricity trading arrangements (NETA) for Corby Power. NETA is being introduced to replace the current wholesale pool later this year.
Dominion previously reported plans to sell its financial services subsidiary and its international energy assets, including those acquired through its merger with Consolidated Natural Gas Co. In April, Dominion completed the sale of its Latin American generation portfolio to Duke Energy Corp.
In May Dominion also agreed to sell its Virginia Natural Gas Co. subsidiary to AGL Resources Inc. as part of its merger with Consolidated Natural Gas.
"We expect to raise more than $1.5 billion in cash through divestiture of these assets," Capps said. He added the sales will help the company achieve its earnings target of $3.25-$3.30/share in 2000 and $3.50-$3.60/share in 2001.