PPL Corp., Allentown, Pa., on Friday said it's purchasing additional interest in the coal-fired Conemaugh power plant from Potomac Electric Power Co. (PEPCO), Washington, DC, for $76.25 million cash. Allegheny Energy Supply Co. LLC, Hagerstown, Md., will also purchase a stake in the 1,711-Mw plant for the same price. The generating station is located near Johnstown, Pa.
PPL, through its PPL Global subsidiary, will acquire half of a 9.72% interest in the Conemaugh plant, and Allegheny Energy Supply will acquire the other half. The combined purchase price is $152.5 million. PPL is one of the plant's original joint owners and already owns an 11.39% interest in the two-unit facility. The plant began operations in 1970.
While PPL and Allegheny are buying the interest to expand their generating capacity in the Mid-Atlantic US, PEPCO says the deal is part of a plans to divest its generating facilities. The proceeds from the sale will gross about $920/kw, which is close to the higher prices seen in recent power plant sales, said John Derrick, chairman and CEO of PEPCO.
Pepco decided it wanted to exit the generation side of the power business in early 1999. In light of the deregulation of power markets, "We decided that we were too small, compared to other companies, to achieve the economies of scale" needed to make money, said Pepco spokesman Robert Dobkin.
Instead, the company decided to focus on other businesses, such as telecommunications. It's still involved in the retail market for natural gas in Washington, DC, and its Maryland suburbs, where it serves 700,000 customers.
William F. Hecht, PPL chairman, president and CEO, said the acquisition would strength PPL's supply of electricity available for sale in the Northeast US, one of the company's major market areas. It also is focusing on the sale of electricity in the western regions of the US. "This acquisition takes us one step closer to our objective of acquiring or controlling 20,000 Mw of generation in key US markets by the middle of this decade," Hecht said.
PPL will control more than 9,700 Mw of generation in its Northeast and Western regions once the sale is completed late this year. It also is developing an additional 1,150 Mw in these regions with new plants in Arizona, Connecticut, and Pennsylvania.
Alan J. Noia, chairman, president, and CEO of Allegheny Energy, said, "The purchase of PEPCO's interest in the Conemaugh station helps fortify Allegheny Energy's historical strength in generation and is another step towards growing our generation, first regionally and then nationally."
After the close of the transaction, Allegheny Energy will have a total generating capacity of nearly 10,000 MW.
Conemaugh's access to both the Mid-Atlantic (PJM) and Midwest (ECAR) power pools, along with its status as an efficient, low-cost power provider, generated "significant buying interest," Derrick said. Final bids for the balance of PEPCO's generation assets, about 5,900 Mw of generating capacity, are due at the end of this month.
These assets include four wholly owned power plants in Maryland and Virginia, an engineering and maintenance facility, five purchased power agreements, and certain facilities and management services. PEPCO has retained Burlington, Mass.-based Navigant Consulting Inc. to manage the divestiture of its generation portfolio, including the Conemaugh plant.