Central Hudson and subsidiaries to sell electric generating plants to Dynegy

Aug 08, 2000 02:00 AM

Central Hudson Gas & Electric announced that it, along with Consolidated Edison of New York, and Niagara Mohawk Power, have agreed to sell the Danskammer and Roseton electric generating plants to Dynegy for $ 903 mm. The plants are located in the Town of Newburgh, Orange County, in the State of New York, and have a combined capacity of 1700 MW.
"We are quite pleased with the sale and will apply Central Hudson's share of the proceeds to benefit our customers and shareholders," said Paul J. Ganci, Chairman of the Board, President and CEO of CH Energy Group, Central Hudson's holding company parent.
"Customers will benefit in three ways. The gain from the sale of the plants, when combined with other measures we have taken, will avoid any future payments by customers, commonly referred to as 'competitive transition charges,' in order to recover stranded costs. Secondly, the proceeds will further provide Central Hudson with the additional funds to accelerate our programs to enhance electric service reliability - without impacting customer prices. And, Central Hudson customers will benefit from a transition power agreement which enables Central Hudson to purchase varying amounts of electricity from the plants through 2004," Ganci said.
He added that, " To a large measure, Central Hudson's success as a low- cost generator was the result of the innovation, commitment, and productivity of our employees at the plants, whose employment is protected under terms of the sale agreement." The proceeds received from the sale will also benefit shareholders. "It re-affirms and enhances the Company's strategy to reinvest and redeploy capital at an accelerating pace in the acquisition of competitive energy services and supply businesses in the Northeast," Ganci said.

Senior Vice President Ronald P. Brand, who headed the Central Hudson auction team, also explained that as a delivery company, Central Hudson's primary mission will be to safely and reliably deliver electricity that customers have purchased in the competitive marketplace. "The transition power purchase agreement will enable us to offer some element of electric price stability during a three- to four-year period while those competitive markets mature," he said.
He noted that the Company expects that the gain from the sale will enable it to maintain delivery wire charges that are among the lowest in the region. At the same time, Central Hudson will -- with the approval of the New York Public Service Commission -- be investing to further enhance electric service reliability.
"The sale agreement recognises the contribution of our 200 employees at the plants, and also provides protection for them," Brand said. Dynegy will retain all unionised employees and will assume the current collective bargaining agreement, and will make employment offers to most of the 40 management employees. Those individuals not retained by Dynegy will be employed by Central Hudson.

John Reed, Executive Director with Navigant Consulting, a leading asset divestiture firm retained by Central Hudson to manage the auction, attributed the successful sale to the productivity and the actions that Central Hudson took over the last decade to consistently invest in the power plants to maintain them at the highest level of operational and environmental performance.
"Central Hudson, its management team and the employees deserve the lion's share of the credit for the high level of interest expressed by bidders and for the competitive sales price offered by the winner," said Reed. "The final price is the result of sound management and dedicated, committed employees who operate the plants safely and effectively."
Central Hudson estimates that its share of the gross sale proceeds will be about $ 695 mm, and that its net proceeds, after taxes and transaction costs, will be an estimated $ 450 mm. Included in these proceeds will be an earned auction incentive of approximately $ 18 mm, which Central Hudson, under its arrangement with the Public Service Commission, will be entitled to retain for the benefit of its shareholders.

According to Senior Vice President Arthur R. Upright, the sale of the plants will require the approval of the Public Service Commission. Central Hudson expects to file promptly for that approval and will propose to establish a balanced and fair distribution to provide benefits to customers and shareholders. Portions of the transaction will also require approval from the Federal Energy Regulatory Commission and the Federal Trade Commission.
The sale will be made to comply with the Public Service Commission's 1996 and 1998 Orders to deregulate the electric utility industry in New York State. The Commission required Central Hudson to sell, at auction, its fossil fuel plants by July 2001. The sale is being made as a result of a competitive auction process and is subject to regulatory approval. It is expected to close within four to six months.
Navigant Consulting, Inc. served as financial advisor on the transaction. Legal counsel was provided by Dickstein, Shapiro, Morin & Oshinsky, and the firm of Gould and Wilkie.

The Danskammer plant consists of four generating units, constructed between 1951 and 1967, with a total generating capacity of 500 MW; Units 1 and 2 burn fuel oil and natural gas, while Units 3 and 4 burn coal and natural gas to produce electricity. In addition, the site contains 5 MW of diesel generators for use in restarting the main units.
The two identical Roseton units, which went on line in 1974, have a combined capacity of 1,200 MW and produce electricity from burning fuel oil or natural gas. Central Hudson currently owns 35 % of the Roseton facility, while Niagara Mohawk Power and Consolidated Edison of New York own 25 and 40 %, respectively.

Central Hudson Gas & Electric is a combination natural gas and electric utility serving a population of approximately 623,000 in a 2,600 square-mile area of the Mid-Hudson Valley, stretching from 25 miles north of New York City to 10 miles south of Albany. Central Hudson serves parts of Albany, Columbia, Dutchess, Greene, Orange, Putnam, Sullivan and Ulster counties. It is a subsidiary of CH Energy Group, a family of energy generation and services companies with holdings throughout the Northeast.

Dynegy is one of the country's leading energy merchants. Through its leadership position in energy marketing, power generation, transportation, gathering and processing, the company provides energy solutions to its customers primarily in North America, the United Kingdom and Europe.

Source: Central Hudson Gas & Electric Corporation
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