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3 January 2007 -- American Electric Power (AEP) announced today that its AEP Generating Co. subsidiary has agreed to purchase the Lawrenceburg Generating Station from an affiliate of Public Service Enterprise Group (PSEG) for approximately $325 million.
The Lawrenceburg plant, adjacent to AEP's Tanners Creek Plant in Lawrenceburg, Indiana, US, is a combined-cycle, natural-gas power plant with a generating capacity of 1,096 MW. The plant began commercial operation in June 2004.
"The purchase of the Lawrenceburg plant will provide additional generating capacity to meet the growing electricity demands of our customers at an attractive price," said Michael G. Morris, AEP's chairman, president and chief executive officer.
"To meet an annual 2 percent growth in peak electricity demand in our eastern seven-state footprint and our reserve margin requirement in the PJM Interconnection, we must build new plants, like our Integrated Gasification Combined Cycle (IGCC) clean-coal generation projects in Ohio and West Virginia, and also seek opportunities to acquire recently completed gas-fired plants when the price is right," Morris said. "When the Lawrenceburg purchase is complete, we will have successfully added more than 2,900 MW of new natural gas-fired capacity to our generation fleet in two years at a significant discount to building equivalent capacity."
AEP said it intends to use the newly acquired plant to meet demand during higher than normal peak periods.
When the transaction closes, AEP Generating Co. will own the Lawrenceburg plant, and AEP will operate the plant as part of the company's generation pool that provides power to AEP's utility units serving customers in Indiana, Kentucky, Michigan, Ohio, Tennessee, Virginia and West Virginia.
PSEG said the proceeds, together with anticipated reduction in tax liability, will be used to retire debt. The transaction will result in an after-tax charge to PSEG and PSEG Power earnings of approximately $210 million, or about 83 cents per share of PSEG common stock. It will be reflected as a charge to discontinued operations in the fourth quarter of 2006. However, the charge will not affect PSEG guidance for 2006 operating earnings of $3.45 to $3.75 per share. The transaction is expected to be accretive to PSEG operating earnings in 2007.
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