Dominion Purchase of Northeast Power Stations Moves Forward
RICHMOND, Va. – Dominion (NYSE: D), one of the nation’s
largest producers of energy, was granted approval Tuesday by the U.S. Bankruptcy
Court for the District of Maryland to purchase three Northeast power stations
from USGen New England Inc.
The purchase price includes $536 million in cash and an estimated
$120 million for an adjustment for fuel inventory and reimbursement for certain
capital expenditures occurring before closing for a total consideration of $656
million.
Over the next seven years, Dominion expects capital expenditures
will average $70 million to $95 million a year, with most of that budgeted for
environmental controls. In 2005 and 2006 the expenditures are expected to total
approximately $230 million.
In July 2003, USGen New England filed for bankruptcy court
protection. As part of its bankruptcy reorganization, USGen decided to divest
its generating assets through an auction. The court’s decision acknowledges
Dominion’s bid as the highest and best offer for the assets. Based on
the court’s sale order, Dominion is proceeding to closing, subject to
regulatory approvals. Closing is planned for early 2005.
Under terms of the agreement, Dominion will purchase the 1,599-megawatt
coal- and oil-fired Brayton Point Station and the 745-megawatt coal- and oil-fired
Salem Harbor Station, both in Massachusetts. Dominion also will acquire the
495-megawatt combined-cycle natural gas-fired Manchester Street Station in Providence,
R.I. The three stations have a total of about 515 employees.
Thos. E. Capps, chairman and chief executive officer of Dominion,
said: "Dominion is extremely pleased with the court’s decision. The
assets, with their mix of coal-, gas- and oil-fired capacity, strengthen a regional
generation portfolio that already includes the output from our Millstone Power
Station. This mix of fuels and generating technologies is important to meeting
New England’s energy needs."
At closing, about 60 percent of the combined output from the
three stations will be sold under contracts to various buyers, with the balance
being sold into the NEPOOL wholesale market.
Dominion is not acquiring any of the facilities' debt in the
transaction and plans to finance the acquisition with a combination of debt
and equity that will be balance sheet neutral. As announced on Sept. 7, Dominion
completed a forward sale of equity transaction, which provides security that
the equity need created by the USGen New England acquisition is funded, and
that proceeds are applied only when closing of the acquisition occurs. In summary,
the forward sale of equity enables Dominion to match the need for proceeds with
actual stock issuance. Dominion expects the transaction to be accretive immediately
upon closing.
Mark E. McGettrick, president and chief executive officer
of Dominion Generation, said: "Dominion has a proven record in operating
fossil stations efficiently, economically, and in compliance with all environmental
regulations. We welcome our new employees to the team and look forward to integrating
their skills and knowledge. We are anxious to demonstrate that we will be a
good corporate neighbor in the communities in which we will operate."
Certain aspects of the transaction must be approved by the
Federal Energy Regulatory Commission. Registration with the Rhode Island Public
Utilities Commission also will be required. Approval under the Hart-Scott-Rodino
Act already has been obtained.
Dominion is one of the nation's largest producers of energy,
with an energy portfolio of about 25,500 megawatts of generation, 6.4 trillion
cubic feet equivalent of proved natural gas reserves and 7,900 miles of natural
gas transmission pipeline. Dominion also operates the nation's largest underground
natural gas storage system with more than 960 billion cubic feet of storage
capacity and serves retail energy customers in nine states. For more information
about Dominion, visit the company's Web site at www.dom.com.
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This release contains forward-looking statements,
including our expectation that the acquisition of the USGen New England assets
will be immediately accretive, that are subject to various risks and uncertainties.
Factors that could cause actual results to differ materially from management's
projections, forecasts, estimates and expectations include changes in the expected
closing date, changes in the expected adjustment to the purchase price at closing,
changes in capital market conditions affecting our financing of the acquisition,
and changes in our projected future capital expenditures, including environmental
expenditures. Other risks include those that affect Dominion generally, including
those that are detailed from time to time in our most recent quarterly report
on Form 10-Q filed with the Securities & Exchange Commission.
