Expanding its portfolio of power plants, closely held Orion Power Holdings Inc. said it will buy Columbia Electric Corp., a unit of Columbia Energy Group, for $200 million plus debt for ongoing construction projects.
Orion said in a statement that it will fund the purchase with proceeds expected from an upcoming initial public offering.
Columbia Energy is in the midst of the approval for its merger with NiSource Inc., an electric and gas utility based in Merrillville, Ind. Even though NiSource does not have a merchant power plant business, Columbia says the sale of the merchant power plant business is not being done to satisfy regulatory authorities or to make a better fit with NiSource.
�In our review of corporate strategy, it makes best sense for shareholders,� says Mike McGarry, spokesman for Columbia Energy. �The sale has nothing to do with the merger.�
McGarry did say that Columbia was trying to sell its four cogeneration plants with a total of 799 Mw, located in New Jersey, Maine, and Texas. The company is under mandate from the US Securities and Exchange Commission to sell those plants, located in Maine, New Jersey, and Texas. The plants must be sold prior to the completion of the merger under rules of the Public Utilities Holding Company.
�Discussions are under way now on that,� says McGarry.
With the sale of the unregulated merchant plant developments and the cogeneration plants, Columbia will be exiting the merchant energy business before it merges with NiSource.
Orion, on the other hand, is deepening its merchant energy strategy with the purchase of Columbia Electric�s assets. The assets that Orion is buying are mostly merchant plants under construction and in advanced development.
The power plants under construction include the 500 Mw simple cycle plant in Wayne County, W.Va., which will be in operation by early 2001 and the 568 Mw combined cycle power plant located near Philadelphia expected to be operating by 2002. Other plants are in advanced development, including a 1,650 Mw combined cycle in Maryland, and the 500 Mw simple cycle in Henderson County, Ky. Both sites are scheduled to be operating by mid-2004. The acquisition will also include some projects in preliminary stages of development.
Formed in 1998 by Constellation Energy Group and Goldman Sachs Group Inc., Orion has amassed a war chest of 81 power plants totaling 5,396 Mw to sell electricity into the unregulated wholesale markets.
Orion did not return calls by deadline.