A review of power plant deals in 2004 shows that utilities are buying.
Jeff Bodington is a principal of financial advisory Bodington & Co. in San Francisco.
Sales of merchant generating facilities during 2004 signaled several trends that illustrate how the power business is evolving. After a nadir in 2002, sales turned up during 2003 and then more than quadrupled during 2004. The backlog of merchant plants for sale is thinning. Buyers and sellers are closing the spreads that led to much talk but few actual sales.
Whether evolution or devolution, the merchant deals done to date show movement to a familiar structure; ratepayers are back at risk. While ratepayers have benefitted from merchant plants, they also paid since competition began with PURPA in 1978, and many of the acquisitions put them at risk for future changes in power values and fuel costs.
The Boost in Deal Volume
More than 18 transactions involving more than 30 merchant power projects are now pending or closed. Examples of these transactions are summarized in Table 1 (see p. 25). This exhibit presents aspects of the buyer, seller, name, location, timing, capacity, fuel, and value associated with each transaction.