Newark-based holding company Public Service Enterprise Group said that it has agreed to sell the Lawrenceburg Energy Center in Lawrenceburg, Ind., for $325 million to AEP Generating Co., a subsidiary of American Electric Power Co.
The 1096-megawatt, gas-fired electric plant, which opened in June 2004, is adjacent to another AEP power plant, the Tanners Creek Plant, also in Lawrenceburg.
"The purchase of the Lawrenceburg plant will provide additional generating capacity to meet the growing electricity demands of our customers at an attractive price," Michael G. Morris, AEP's chief executive officer, said in a statement.
PSEG spent about $640 million to construct the plant, but it operated at most about 20 percent of the time because increasing prices for natural gas made plants run on other fuels more economical, such as AEP's fleet of coal-fired plants. AEP said it only plans to operate the plant when electricity demand is above average.
Frank Cassidy, president and chief operating officer of PSEG Power, one of the country's biggest independent power producers, said the sale was the best move for PSEG shareholders and plant employees, given conditions in wholesale power markets.
The deal is PSEG's second recent discounted sale of a fairly new power plant to American Electric, following the May 2005 sale of PSEG's Waterford plant in Ohio for $220 million, less than half its construction cost.
The latest sale is expected to bring PSEG $425 million, including the price for the plant and an anticipated decrease in tax liability.
PSEG expects to take an after-tax charge of $210 million, or 83 cents per share, but affirmed its 2006 per-share operating earnings forecast of $3.45 to $3.75 for 2006.
The divestiture should add to operating earnings in 2007.
On the New York Stock Exchange, shares of PSEG rose 29 cents to close at $66.67; shares of AEP edged up 27 cents to finish at $42.85.
The sale is expected to close in the second quarter of this year, and requires approval by federal and state regulators.