Allegheny completes purchase of 3 plants

Midwest power facilities, all fired by natural gas, bought from Enron

May 04, 2001|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

As part of its efforts to become a national energy supplier, Allegheny Energy Inc. announced yesterday that it has completed the purchase of three natural gas-fired power plants in the Midwest from Enron Corp.

The plants can generate 1,710 megawatts of electricity - enough to power almost 2 million homes.

The three facilities will allow Allegheny Energy Supply Co., Allegheny's unregulated generation subsidiary, to sell power within the Southern, Central and Midwestern regions of the country.

The acquisition, financed through a combination of debt and equity, will immediately add to Hagerstown-based Allegheny's earnings in 2001, excluding transaction costs and other costs related to integration, the company said. Terms of the acquisition were not disclosed.

"It's a good move for a couple reasons," said Greg Gordon, a vice president of Goldman Sachs Group Inc. who tracks utilities. "It not only expands their presence in the midwest region, but also diversifies them in the type of fuel they're using, diversifies their plant type and diversifies them geographically."

Allegheny now owns mostly coal-fired power plants that are mainly mostly in Virginia, West Virginia and Ohio. The acquisition gives the company plants in Gleason, Tenn., Wheatland, Ind., and Manhattan, Ill., near Chicago

Also, the three plants are designed for use in times of peak electricity demand, whereas most of Allegheny's plants run continuously.

On Wednesday, Allegheny closed its public offering of common stock and raised $667 million to help finance the transaction. The company sold 14.26 million shares, priced at $48.25 per share.

"They need to find ways to grow the business to meet the financial goals they've promised the investment community," Gordon said. "They're doing well."

In a recent earnings report, Allegheny said it was well on its way toward meeting its expectations of $3.80 to $4.10 a share for 2001 earnings. In 2000, the company earned $236.6 million, or $2.14 a share.

Earlier this year, Allegheny Energy Supply acquired 83 megawatts of coal-fired generation in the Conemaugh Generating Facility near Johnstown, Pa., for $78 million.

The company also announced plans to build three natural gas, combined-cycle plants that will produce 1,080 megawatts in La Paz County, Ariz., for $540 million; 630 megawatts near South Bend, Ind., for $400 million; and 540 megawatts in Springdale, Pa., for $235 million.

Another 220 megawatts of peaking capacity already has been built in Pennsylvania. Output from the plants will be marketed by Allegheny Energy Global Markets, the company's new energy trading unit, which was bought in March.

Alan J. Noia, chairman, president and chief executive of Allegheny, called the Midwestern plants the company's "largest generation acquisition to date."

Noia added that, "because of its national presence, Allegheny Energy Global Markets will be able to market the output from these newly acquired facilities in a wide variety of ways ... so that overall operation efficiency and shareholder value is maximized."

Allegheny now owns or controls about 11,700 megawatts, with expectations of owning more than 14,000 megawatts by 2005.

Shares of Allegheny dropped 44 cents on the New York Stock Exchange yesterday to close at $49.92.

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