11 August 2009

LS Power deals for 8 power plants

New York-based LS Power Associates will pay $1.5 billion for eight of Houston-based power company Dynegy’s plants plus another under development.

Dynegy felt the company needed to bolster its finances and cut near-term debt.

LS Power will add plants in Kentucky, Illinois, Michigan, and Connecticut. Also, the LS Power’s stake in Dynegy, acquired in 2006, will reduce 15% from 40% once the deal closes, a Dynegy spokesperson said.

LS Power adds five plants designed to run when power prices and demand are highest. The plants in Arizona and Connecticut run more frequently.

All of the operating plants going to LS Power burn natural gas. In addition, the company gets Dynegy’s stake in Sandy Creek, a coal-burning plant under construction in Texas. Dynegy will keep coal-fired units in Illinois, Arkansas, and New York.

The company bases its prices for power generally on natural gas prices, which are down 70% from a year ago.

Under the deal with LS Power, Dynegy will sell about a quarter of its generating capacity. LS Power also will receive $235 million in notes due in 2015.

The deal should close before the end of the year and will help Dynegy reduce its near-term debt maturities and simplify the company’s structure. Dynegy has total debt of $5.1 billion.

“We will also maintain a strong foundation to continue executing our strategy with a diversified asset portfolio that is leveraged to both prices and demand as the U.S. economy and power markets recover,” said Bruce Williamson, Dynegy’s chairman, president, and chief executive.

Year-to-date, Dynegy posted a loss of $680 million, compared with a loss of $424 million in the first half of 2008. Revenue so far this year has totaled $1.4 billion, up from $865 million in the first half of 2008.

For related information, go to www.isa.org/productivity.