Mirant agrees payout and plans $6bn restructuring

Energy company Mirant has agreed to pay up to $750m to settle claims that it manipulated the California power market during that state’s power crisis in 2000 and 2001. Shortly after reaching the agreement, the company filed a reorganization plan that would see over $5bn of debt and $1bn in other claims converted to equity. If accepted, the plan could see the company emerge from Chapter 11 bankruptcy protection by mid-year.

In its deal with California, under which Mirant said it would pay no cash and admit no wrongdoing, the company will forgo claimed debts of $320m. It will also give California utility PG&E one 520 MW power station currently under construction, and options on taking over two other power plants when Mirant retires them. The settlement also included a further $150m claim, but since that will form part of Mirant’s bankruptcy proceedings, along with other creditors, it is unlikely to be paid in full.

AES increases wind investment

US-based power company AES Corp is to acquire SeaWest Holdings, in a move that AES says will make it one of the US’s largest wind developers.

SeaWest WindPower has been involved in the development and installation of 850 MW of wind generation since it was formed in 1982, and it is involved in the operation of around 500 MW. It has site control of 1800 MW of development sites in ten states in the Western USA.

SeaWest Holdings’ other companies include Prasentia, a system integration specialist.

AES said it would pay $6m for SeaWest Holdings and the deal was expected to reach completion by the end of the first quarter of 2005. The company also announced plans to acquire and construct SeaWest’s 120 MW Buffalo Gap wind project at an estimated cost of $165m. The company plans to begin construction at the site near Abilene, Texas, in early 2005 and completion is expected towards the end of the year.

The acquisition is a rapid increase in wind investment for AES, whose first move into the wind market, in September 2004, was an equity investment in Wind Force.

UK DNOs accept new rules

Britain’s 14 distribution network operators (DNOs) have all accepted a revised financial regime that will apply for five years from April.

As regulated businesses the DNOs’ investment and charging regime is set on a five-yearly basis by the UK regulator, the Office for Gas and Electricity Markets (Ofgem). The 2005 review had been under particular scrutiny because Ofgem is required to keep costs low for consumers, while DNOs had argued that they needed more opportunity to pass on the costs of investment and innovation, if government targets on renewable energy and distributed generation were to be met.

US utilities looking to new generation

Although utility executives are cautious about making predictions, around two thirds believe the industry’s financial performance will improve in 2005, according to a regular survey, but respondents said regulatory certainty would be the key to success.

In ‘Electricity Outlook 2005’, an annual survey sponsored by the Edison Electric Institute and the Canadian Electricity Association, consultants GR Energy polled executives at 70 US and Canadian utilities.

They said the generation sector was currently the most profitable, compared to transmission or distribution. However, they did not favour a single business model, saying that more than one way would be successful.

They said additional capacity must be built that could come into service over the next three to five years, and the largest part of that investment would be in coal, including integrated gasification combined cycle plants.

The utilities thought there would ultimately be “strong pressure” to take action on global warning, but that the pressure would be delayed.

PPM Energy buys US renewables company

PPM Energy, the US-based subsidiary of ScottishPower, has acquired Atlantic Renewable Energy Corp. and its wind development port-folio. The company will become a wholly-owned subsidiary of PPM, called PPM Atlantic Renewable.

The renewables company has initiated and developed six wind power projects totalling 162 MW in the eastern US states of New York, Pennsylvania, West Virginia and New Jersey. It has a further 500 MW under development in those states. PPM Energy already has 830 MW of wind capacity operating in the US and its goal is to bring 2300 MW of new capacity to market by 2010.

PPM noted that the acquisition came as the northeast and mid-Atlantic regions of the US had passed “some of the most robust state Renewable Portfolio Standards in the nation”.

News digest

Saltend alternative: Among the alternatives being considered for Saltend, Calpine’s UK power station, is an equity offering. The company has set up a Jersey-based subsidiary that will offer $260m of redeemable preferred shares; the proceeds will be loaned to a holding company owning the plant.

Waukesha partners: ANGI International has been named as Power Partner for Waukesha Engines. ANGI’s natural gas vehicle refuelling stations will be powered by Waukesha products. Meanwhile, in Poland Lanre-Ruhaak, a subsidiary of Enerflex, has been named Waukesha’s distributor .

Capgemini: EDF Energy has chosen Capgemini UK to help develop and maintain its customers branch IT applications. The co-sourcing contract is worth à‚£9m over three years.

New engine: Cummins Inc is to announce a new-generation QSB engine in March 2005. The four and six cylinder engines will meet Environmental Protection Agency Tier 3 emissions requirements.

Sithe acquisition: The US Federal Energy Regulatory Commission has given the all-clear to Dynegy’s acquisition of ExRes SHC from Exelon Corp. The acquisition includes generating companies Sithe Energies and Sithe Independence.

Climate sector: Grupo Santander and merchant banker Climate Change Capital are to jointly develop a financial advisory business in Spain. The companies estimate Spain’s climate change sector will be worth €1.3 bn in 2005.

Acquisition: Siemens Power Transmission and Distribution has acquired the business activities of Shaw Power Technologies and Shaw Power Technologies International UK. Known as PTI, the company’s focus is on network planning software and engineering studies, including widely-used simulator software.

Rudden completion: Black & Veatch has completed acquisition of R J Rudden Associates. Adding the strategic, economic and management consulting company to Black & Veatch’s portfolio will expand the company’s ability to provide financial solutions in the energy and water sectors.

Alstom return: engineering company Alstom has returned to “a normal level of order intake”, company chairman Patrick Kron told the Financial Times. He said orders in turbo systems were up by 6 per cent, as were power service sales. The company expected to deliver orders for the year of €15 to 16bn, and meet its targets for 2005 margins of 3.5 to 4 per cent.

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