Aquila, Inc. and Cogentrix Energy, Inc. announced today that they have signed a definitive agreement for Aquila to acquire privately held Cogentrix, a leading independent power producer.
The transaction includes a purchase price of $415m for 100 per cent of the common stock of Cogentrix, as well as the assumption of $355m of recourse debt and approximately $770m of non-recourse project-level debt.
This transaction is expected to be immediately accretive to earnings and exceed Aquila’s targeted investment returns.
The agreement adds 3496 MW to Aquila’s current portfolio of 3655 net MW in operation and under construction and further diversifies Aquila’s portfolio by region, fuel type and technology.
After combining operations, Aquila’s generation mix will be approximately 70 per cent contracted, an optimal position for balancing Aquila’s targets for predictable cash flow and earnings while maximizing commercial optimization opportunities.
“Since its inception in 1983, Cogentrix has established itself as one of the most successful and largest independent power producers in North America, with top-quality people and assets as well as a proven track record,” said Robert K. Green, president and chief executive officer of Aquila. “This is a compelling transaction for Aquila. It is expected to accelerate our strategy and improve the predictability of our cash flow and earnings. It adds industry-leading operating and build-to-suit development expertise, while leveraging our ability to optimize our collective assets.”
Cogentrix operating, environmental and safety records are consistently among the best in the industry and, at the same time, the company has delivered strong earnings and cash flow year after year.
Substantially all Cogentrix generation capacity is financed on a stand-alone project basis, supported by long-term power purchase agreements or tolling agreements with investment-grade customers. This transaction is expected to contribute to Aquila’s strategic goal of adding highly predictable cash flow and earnings. At closing, Cogentrix will have 13 projects in service and two plants under construction, which are scheduled to be fully operational by June 2003. Upon completion of the transaction, which is expected in the third quarter of 2002, Cogentrix operations will be combined with Aquila Merchant Services’ North American Capacity Services business.
“This transaction offers the best result for our shareholders and employees,” said David J. Lewis, chairman and chief executive officer of Cogentrix. “Aquila’s corporate philosophy and business management are remarkably similar to our own and were important considerations in the eventual success of this transaction. The combination of collective strengths in risk management and power generation development and operation will help ensure Aquila’s continued growth and success.”
Immediately prior to Aquila’s acquisition of Cogentrix, General Electric Capital Corporation (GECC) or its subsidiaries will acquire 1024 net MW of Qualifying Facility power plant assets currently owned by Cogentrix in order for the plants to maintain their Qualifying Facility status under the Public Utility Regulatory Policy Act (PURPA).
The transaction initially will be financed with an acquisition bank facility underwritten by Credit Suisse First Boston. Aquila intends to refinance the acquisition facility with a combination of common stock and mandatorily convertible securities. Credit Suisse First Boston acted as exclusive financial advisor to Aquila.
The acquisition is conditioned on Hart-Scott-Rodino clearance, approvals by the Federal Energy Regulatory Commission (FERC), and completion of the asset sale to GECC.