Int'l Power to buy U.S power plants for $856 million

LONDON (Reuters) - British-based electricity firm International Power (IPR.L) has agreed to buy four U.S. power generation plants for $856.4 million to expand its presence in the country, it said on Monday.

International Power said it was buying the plants in the U.S. power regions of Pennsylvania, New Jersey and Maryland (PJM) and Midwest Independent System Operator (MISO) from Tenaska Power Fund and an affiliate of Warburg Pincus.

Together the four plants have capacity to generate 1,857 megawatts of power.

"Overall we believe that the deal is at a good valuation and fits well with the current portfolio in the U.S.," UBS analysts said in a research note.

International Power's U.S. operations currently focus around Texas and New England.

The firm said the deal would immediately boost its free cash flow and was likely to be neutral to its earnings in the first few years before generating strong growth thereafter.

It will be funded by non recourse project debt of $434 and $461 million of equity and should complete by the end of the third quarter, International Power said in a statement.

The PJM power pool is the largest power region in the United States and covers 11 states including Pennsylvania, New Jersey, Maryland, Delaware, Virginia, West Virginia and parts of Ohio, Indiana, Illinois, Michigan and North Carolina.

MISO covers 15 states and one Canadian province including most of the states of Michigan, Iowa, North Dakota, South Dakota, Nebraska Minnesota, Illinois, Indiana, and Wisconsin.

At 0750 GMT, International Power shares were up 0.8 percent at 427.5 pence, valuing the firm at about 6.5 billion pounds ($12.7 billion).

(Reporting by Mark Potter; editing by Rory Channing)