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Powergen beats target for debt reduction

UK energy producer, Powergen plc (Powergen), has signed an agreement to sell its mining and power station interests in Germany and Hungary to NRG Energy, Inc. (NRG Energy) for a total of ௿½130m ($186m). The deal completes Powergen’s strategic refocusing on the US and UK energy markets and the sale of its international business, other than a minority stake in the holding companies for Powergen’s former interests in Australia, India and other parts of Asia.

The company’s disposal programme will achieve a ௿½1.37bn total debt reduction, significantly ahead of the ௿½1bn target originally set.

Powergen has been attempting to reduce its debt burden since its acquisition of Kentucky utility LG&E Energy for ௿½3.64bn last year. The weight of debt had been restricting the company’s ability to achieve further international growth, which it felt was necessary. Despite reaching its target for debt reduction, Powergen has become a takeover target. German power group E.ON is presently seeking regulatory approval before making a formal offer for the company. The agreed bid is for ௿½9.5m including the remaining debt.

The sale to NRG Energy includes Powergen’s wholly owned assets, Csepel I and II as well as its stake in Mibrag GmbH and Saale Energie GmbH (owner of Schkopau power station) in Germany.

The operating profit for these assets for the year ending 31 December 2000 was ௿½28m.

In Germany Powergen owns one third of Mibrag GmbH, an open cast lignite mining operation with associated power and steam generation plants and a coal dust and briquette production facility. The operation consists of two coal mines, Profen and Schleenhain, with a total output of around 16 million tonnes per annum, and three CHP power stations, Deuben (86 MWe/360 MWt), Mumsdorf (110 MWe/357 MWt) and Wahlitz (37 MWe/119 MWt). The other shareholders are NRG Energy and Washington Group International each with a one third share.

In Hungary Powergen owns the recently commissioned Csepel II, a state of the art 389 MW CCGT on Csepel island. Csepel II has a 20 year PPA with Hungary’s state electricity utility, Magyar Villamos Muvek and a 20 year gas supply contract with MOL, Hungary’s monopoly gas supplier. Powergen is also the sole owner of Csepeli Eromu (Csepel I), Csepeli Aramtermelo Rt. and Powergen Energia Rt (Csepel II).

Under a 15 year contract, around 3.5 million tonnes of coal from Mibrag is sold to Schkopau power station, a 900 MW coal fired plant in which Powergen has an effective 21 per cent stake through its 50 per cent ownership of Saale Energie GmbH which in turn owns 42 per cent of Schkopau. The other 50 per cent of Saale Energie GmbH is owned by NRG Energy with the remaining 58 per cent stake in Schkopau being owned by E.ON.

In addition to coal sold to Schkopau, up to 10 million tonnes per annum of coal from Mibrag is sold to the new Lippendorf power plant under a 40 year agreement.

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