March 4, 2011 / 12:59 PM / 8 years ago

AES to sell four New York coal plants

* Plants may be worth $500-$600 million

* AES writes fair value to zero due negative cash flow

NEW YORK, March 4 (Reuters) - AES Corp (AES.N), a U.S. based global power generation and distribution company, wants to sell its four coal-fired plants in New York due declining profit margins and stricter federal and state environmental regulations.

In a conference call following the release of the Arlington, Virginia-based company’s fourth quarter earnings report earlier this week, Paul Hanrahan, AES President and CEO, said the company wanted to sell the coal plants.

In its earnings release, AES recorded an impairment charge of $827 million at its AES Eastern subsidiary, which owns the coal plants, as weak natural gas costs have pressured power prices lower, coal costs have increased and capacity payments likely to decline.

That impairment charge reduced the fair value of the subsidiary to zero because management forecast the plants would have negative operating cash flow and losses for years, the company said in the earnings report.

“We don’t think it’s going to make sense for us or another public company to be owning those assets,” Hanrahan said in the call, adding, “But we do think that there are people out there that see the value potential We think we might get better value for it, if we were to transact and put that out in the market.”

The four plants, which have a combined capacity of 1,271 megawatts, are the 306-MW Cayuga, 156-MW Greenidge, 681-MW Somerset and 128-MW Westover. That’s enough to power more than a million New York homes.

Coal plants are not put up for sale very often so value is hard to come by. It costs about $3,000 per kilowatt to build a new coal plant before financing costs.

Local papers said the plants could be worth $500-$600 million with most of the value in Somerset, which entered service in 1984.

The other plants were built in the 1940s and 1950s and AES has already told the state it wanted to retire units at Greenidge (1950 and 1953) and Westover (1943 and 1951). The two units at Cayuga entered service in 1955.

AES acquired the four plants as part of six it bought from the former New York State Electric and Gas (NYSEG) utility in 1999 for $1.85 billion.

AES did not say when it planned to sell the plants. The Financial Times said AES hired Barclays PLC (BARC.L) to advise on the sale.

Officials at AES were not immediately available for comment. (Reporting by Scott DiSavino; Editing by John Picinich)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below