Independent power producer NRG Energy Inc., Minneapolis, Tuesday said it will acquire a 5,691 Mw portfolio of operating projects and projects in construction and advanced development from LS Power LLC for $658 million, subject to purchase price adjustments at closing time.
In trading on the New York Stock Exchange Wednesday morning, NRG shares were up 9/16 or 2.21% at 26 1/16.
"This jump starts our greenfield development," said Chairman and CEO David Peterson said in a analyst conference call. NRG executives said the plants were acquired during an auction begun in August.
Additionally, Peterson said NRG has the opportunity to acquire ownership interests in the next 3,000 Mw of generation projects developed and offered for sale by LS Power, East Brunswick, NJ, and its partners between now and 2005. Privately held LS Power develops, finances, owns, and manages independent power projects in the US.
Purchase of the projects is expected to increase NRG's total portfolio to "at least" 28,400 Mw by 2005, Peterson said, and contributes to its goal of having 50,000 Mw of generation in place by 2005.
NRG is acquiring net ownership interests totaling 1,755 Mw in four facilities in operation and construction. An additional two projects�totaling 2,336 Mw�are expected to reach construction financial close early in 2001. NRG said the remaining four projects, totaling 1,600 Mw, are in advanced development.
All facilities employ natural gas-fired combined-cycle technology and are near direct interconnection with multiple competing gas pipelines. As part of the transaction, NRG also receives rights to a number of turbines.
Additionally, the acquisition strengthens NRG's presence in the central US with high-efficiency, gas-fired, baseload facilities that complement NRG's current facilities which are principally coal-fired baseload, as well as gas and oil-fired peaking and intermediate dispatch level units, said Craig A. Mataczynski, president of NRG North America.
The facilities are located in Illinois, Mississippi, Florida, and Texas, and provide access to the Chicago, New Orleans, and Tampa electricity markets, said NRG executives.
CFO Leonard Bluhm said output at two of the plants is already committed under long-term contracts, 85% is committed to power marketers such as Dynegy Inc. and UtiliCorp United Inc.'s Aquila Energy at two other plants, and negotiations are ongoing for the output at the remainder of the plants.
Bluhm said NRG is adhering to its strategy of selling 50% of the output under long-term agreements, 25% in forward contracts, and 25% will be reserved for "pure merchant activity."
Peterson said NRG expects the acquisition to add to earnings and help NRG achieve its 2001 earnings forecast. In addition, NRG expects the portfolio's contribution to earnings per share to increase to about 30�-50�/share once the projects in construction come on line in 2003.
At closing, which is expected to occur during first quarter 2001, the company will finance the acquisition with a bridge loan facility, Bluhm said. In early 2001 NRG plans to replace the bridge loan and finance these projects with a combination of common equity, preferred securities and senior debt, he told analysts.
Earlier Avista-STEAG LLC and NRG Energy Inc. reported the companies have formed a partnership to build, operate, and manage a 633 Mw natural gas-fired merchant power plant in Fort Bend County, Tex., 30 miles southwest of Houston. Avista-STEAG LLC will retain 51% ownership in the project while NRG will own 49%. The partners said the project has secured its major permits. Construction is scheduled to begin in early 2001 with commercial operation expected in January 2003.