Con Ed and Northeast seal merger deal
New York City-based Consolidated Edison has agreed to acquire Northeast Utilities (NU) in a cash and stock deal worth $3.3bn. The deal will create the largest electricity distribution utility in the USA in terms of its customer base.
The acquisition is a further sign of consolidation in the US utility industry in response to deregulation. Con Ed says that it expects to save about $1.5bn over ten years through the deal, and will increase its customer base by around 50 per cent. The combined company will have over 5m electricity and 1.4m gas customers across the northeast. It will have a market capitalization of $19bn.
NU shareholders will receive cash and stock valued at $25 per share, and will also get an additional $1 per share if NU agrees a deal to sell its interests in two nuclear facilities. Con Ed will assume $3.9bn in debt, most of it related to the Millstone and Seabrook nuclear plants operated by NU. Con Ed believes the deal will help it diversify its operations. NU is the largest transmission and distribution company in the northeast.
New GT plant orders for US
Newly formed ABB Alstom Power has strengthened its position in the highly competitive US gas turbine market by securing $1bn of new orders. The company announced that it has reached deals to equip 2400 MW of gas-fired power plants.
ABB Alstom received orders from American National Power of Houston, Texas, and PG&E Generating of Bethesda, Maryland, for combined cycle power plants in Texas, Massachusetts and Connecticut.
Meanwhile, GE has received contracts worth nearly $290m to supply F technology gas turbines and services to two IPP projects in Texas.
US energy bill progresses
The US House Energy and Power Subcommittee has voted to approve legislation to deregulate the $215bn US electricity industry. Energy Secretary Bill Richardson said that the bill was a positive sign, but that it did not contain the necessary elements to ensure that consumers benefit from competition.
The Electricity Competition and Reliability Act is designed to remove obstacles to competition in the USA’s power market. It would repeal the 1935 Public Utility Holding Act (PUHCA), which restricts utility operations and investment, and the 1978 Public Utility Regulatory Policies Act (PURPA), which requires utilities to purchase power at prescribed rates from independent power producers.
The bill does not contain a mandate for utilities in states that have not yet opened up their electricity markets to give up their monopoly service territory. The committee also stripped the bill of a reciprocity provision, which would have allowed ‘open’ states to bar market entry by utilities from ‘closed’ states.
Some market players believe the bill does not go far enough in encouraging competition.
New rules will stimulate investment
Brazil’s mining and energy ministry has announced new rules for investment in the power sector that are likely to stimulate the construction of natural gas fired power plants in the country. The package of measures includes incentives to the development of generating capacity, such as credit lines and low fuel prices.
The government hopes that the measures will defer problems in Brazil’s power sector, and will revive postponed or stalled projects. The announcement came as a number of companies said they would be investing in the sector. The package of measures includes a Brazilian Development Bank credit line and an offer by Petrobras to reduce the final price of natural gas destined for thermal power plants.
In October, Spain’s Iberdrola and Florida Power and Light said they will jointly invest $200m to build a 232 MW plant in Rio Grande Norte state. USA-based Sithe and Marubeni are to build a 1000 MW power plant in Cubatao, Sao Paulo state, while Canadian group Brascan is to invest $2bn in new projects in Brazil, including several small hydropower plants.
Canadian emission credits deal
Canadian power utility Ontario Power Generation has reached a deal with Zahren Alternative Power of the USA to buy of 2.5m tonnes of carbon dioxide emission reduction credits. The purchase, announced in October, is thought to be the largest exchange of rights to emit greenhouse gases to date.
The deal will help Ontario Power to reach the greenhouse gas reduction targets agreed under the 1997 Kyoto protocol on climate change. The total value of the deal was said to be less than $25m. Both companies said that they hope the deal will stimulate the emission trading sector, reducing the need for regulation.
The privatization model for Santa Catarina distributor Celesc will be ready by the end of the year. The state governor has promised to open the issue to public debate and has said that a multinational corporation would not be allowed to become Celesc’s controller.
US company AES has paid $472.7m for the Sao Paulo state-owned Tietàƒª hydropower company, a 30 per cent premium over the minimum auction price. It outbid Tractebel-owned Gerasul in the October sale. Tietàƒª owns a complex of nine hydropower plants with a total capacity of 2644 MW.
Ontario Power Generation is to sell the Bruce nuclear generating facility. The facility was built at a cost of C$7.7bn ($5.23bn) and is the world’s largest atomic power complex. Ontario says that it does not have the expertise nor the need to operate Bruce and two other nuclear complexes it controls. The utility has been criticised by the federal atomic watchdog for being behind schedule on the refurbishment of its nuclear reactors.
Final approval has been given for the sale of 90 per cent of state-owned electricity transmission company Interconexion Electrica SA (ISA). The value of the utility has been set at $1.36bn. Bids for the company have already been taken and a winner will be announced in January 2000.
Spectrolab and National Renewable Energy Laboratory have achieved a world-record conversion efficiency of 32.3 per cent for a solar cell that could double the power output of terrestrial applications in operation today. The multi-junction design has been used in high-power space satellites, and could be adapted for the terrestrial photovoltaics industry. The two organizations are in the process of finding industry partners for field demonstration projects.
The National Rural Electric Cooperative Association (NRECA) and EPRI are to carry out a distributed generation demonstration project to test the suitability of microturbines as alternative electric power sources for commercial consumers. The project has attracted $200 000 of research funding from the Department of Energy, and will test units in the 25-75 kW range.
AmerGen has reached a deal with the Vermont Yankee Nuclear Power Corp. to purchase the 540 MW Vernon generating plant. AmerGen will pay around $23.5m for the plant and will assume full responsibility and liability for operating and decommissioning the plant.
The government has confirmed that the privatization of the electricity sector will go ahead following reports that the sales may be delayed for two years.