LONDON Britain's Centrica (CNA.L) said it would sell its Texas gas-fired power stations to Blackstone (BX.N) for $685 million in cash and return the proceeds to investors by extending its share buyback program.
Shares in the energy company, which have fallen nearly 20 percent in the last three months, jumped to the top of the FTSE 100 share index leaderboard after the deal was announced on Wednesday.
The three units, located in Paris, Bastrop, and Mission, have a combined capacity of 1,295MW, Centrica said. As part of the deal it agreed with Blackstone a three-year call option arrangement for an equivalent amount of capacity.
"This transaction allows us to realize value from our gas-fired fleet, while ensuring stability of price and supply in the Texas power market through the call option arrangement," said Badar Khan, President and CEO of Centrica's North American subsidiary Direct Energy.
Shares in Centrica were up 2.5 percent at 331.2 pence by 1047 GMT, outperforming a 0.3 percent rise in the FTSE 100 index .FTSE. The stock has been buffeted by a debate around energy prices for consumers in Britain, particularly the opposition Labour Party's plan to freeze prices if it won power in 2015.
The shares fell further last month when Centrica cut its 2013 earnings forecast, citing not only rising costs in Britain but also intensifying competition in the United States.
Analysts at Liberum Capital said the Texas deal made sense.
"As the Texas market tends to be well supplied, a tolling agreement helps to free up capital," they said.
"As we have long advocated, an extension of the share buy-back scheme (especially at the current prices) could bring better shareholder returns."
Centrica said it would return the proceeds from the sale to shareholders through a 420 million pound ($682 million) extension of its share repurchase program in 2014.
(Reporting by Paul Sandle; Editing by Neil Maidment and Jane Merriman)