BGE unit to share in money from suit Jersey Central to pay ZTC 2 firms $125 million

June 27, 1996|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Baltimore Gas and Electric Co.'s alternative energy subsidiary will split $125 million as part of a lawsuit settlement with Jersey Central Power & Light, after the New Jersey utility backed out of a cogeneration power contract.

The settlement with BGE's Constellation Power Inc. and Advanced Power Systems Inc. ended a court battle between the partnership and Jersey Central that lasted more than two years and led all the way to the U.S. Supreme Court.

As part of the settlement, Constellation Power and Advanced Power Systems (APS) have already received $65 million of the $125 million from Jersey Central, according to court documents.

The balance from Jersey Central will be paid in installments through 1999.

APS is an entity controlled by the family of James J. Wilson, the chairman and chief executive of real estate firm Interstate General Co. Ltd. Partnership who was sentenced June 17 to 21 months in prison and fined $1 million for violating federal wetlands laws.

"The customer decided they didn't need the power because of changes that have taken place in the industry since the contract was signed," said Douglas S. Perry, Constellation Power's vice president of business development. "As the industry has gotten more efficient and costs have gone done down, the standards for judging these projects have changed."

Perry added it has not yet determined how much of the settlement will ultimately be available to the 10-year-old company, because Constellation must in turn settle claims by contractors and lenders, as well as pay legal fees and restoration costs. Of the payments the partners have already received, each has netted $17 million.

Even if Constellation does profit from the settlement, however, it is unlikely that BGE shareholders will receive any of the proceeds.

"Any money Constellation gets will be plowed back into new business," Perry said. "The number we'll end up with isn't as significant as you would think, because it's very expensive to build these plants."

In all, Constellation Power owns portions of 26 alternative energy plants in four states and South America, plants valued at roughly $2.5 billion.

Larry Sweeney, Jersey Central's manager of cogeneration, said the utility expects to save $300 million on a net present value basis by ending the contract.

"We're not thrilled with the outcome but we're happy to get out of it," Sweeney said. "It's in the best interests of our customers."

Jersey Central serves 1.9 million customers in New Jersey and Pennsylvania.

Constellation Power and APS signed the 20-year contract with Jersey Central to build a $160 million, gas-fired cogeneration power plant in 1991. The plant was slated to become operational at the end of 1997.

Jersey Central decided to terminate the contract when it discovered the cogeneration power would cost $1.2 billion more than buying power on the open market.

That decision resulted in a lawsuit by Constellation and APS against Jersey Central in 1994.

Pub Date: 6/27/96

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