Kansai Electric, Morgan Stanley in joint venture

Japan's second biggest electric utility Kansai Electric Power Co. said it will enter the North American electric power market in a 50-50 joint venture with a unit of US investment bank Morgan Stanley Dean Witter &Co. A joint venture company will buy six idle gas turbine generators with capacity of about 360 Mw from Kansai Electric and relocate them to North American plant sites.


Kate Thomas
OGJ Online

Japan's second biggest electric utility Kansai Electric Power Co. said it will enter the North American electric power market in a 50-50 joint venture with a unit of US investment bank Morgan Stanley Dean Witter &Co.

A joint venture company will buy six idle gas turbine generators with capacity of about 360 Mw from Kansai Electric and relocate them to North American plant sites. Some news reports said the plants will be located in Georgia, Nevada, Arizona, Oregon, Washington, and Canada.

"We are actively researching the sites," said John Woodley, a principal on Morgan Stanley's New York trading desk. He said details concerning location of the plants still have to be worked out, but the West has been an especially attractive market this summer.

"The East looked like a hot market until this summer," he says. "We want to stay flexible."

The joint venture elected not to locate in the power-starved California market because of caps that have been imposed on electricity prices in that state, Woodley said. He added the units being moved from Japan "will meet all applicable environmental requirements."

The venture, the first for the Japanese power company in the US, expects to begin operating in the summer of 2001. In a news release, Kansai said it will gain "know-how in electricity trading activity in [the] US where deregulated markets have been established prior to Japan." It said the joint venture will operate under the name Naniwa Energy.

Woodley said both companies will be trading power on the US power market.

Morgan Stanley is already taking about 185 Mw, or all the electric output from generating plants in Lee County, Ala., and Bainbridge, Ga. and selling it into the market, Woodley said.

As the Japanese electricity market institutes competition, electric companies are under pressure to improve efficiency, cut costs, and bring down power prices. Nonutility firms have been allowed to sell power to big commercial and industrial users since March.

Tokyo Electric Power Co., Japan's biggest electric company, and Mitsubishi Corp., established a US beachhead in November by investing $200 million in Orion Power Holdings Inc., Baltimore, Md.

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