Corporate Upper Class
For Sale: Texas GenCo
By Jimmy Myatt
Jul 22, 2004, 16:27

In the midst of the largest electrical deregulation case in history, the main player, CenterPoint Energy, has inked a deal to sell its generating assets, Texas GenCo, to a group of private investors for $3.65 billion – a higher number than both CenterPoint and Wall Street set for the company’s value.

Hearings for the $4.4 billion CenterPoint “stranded costs” case have concluded at the Public Utility Commission, but the PUC will probably not rule on the case until the end of August at the earliest. Although CenterPoint has been taking bids to sell Texas GenCo, many parties close to the case expected the sale to happen after the commission’s decision. What effect the sale will have on the hearings is up in the air.

“This is unknown territory here,” said Terry Hadley, spokesperson for the PUC. “It’s unclear what if any effect this sale would have to the commissioners.”

There is nothing in the rules or regulations that would prohibit the sale of GenCo, Hadley said. And the end result for CenterPoint would remain the same. If CenterPoint is awarded all that it is seeking, electricity bills will increase by approximately $10 a month for the next 12 to 15 years – for about 85 percent of Houston households.

Hadley said that the commissioners could reopen the case for more information in regards to the sale or could consider the sale in some relevant fashion without being a part of the specific hearings.

CenterPoint said it expects the deal to generate cash proceeds of $2.9 billion, or $45.25 a share, for its 81 percent stake in Texas Genco. The other 19 percent is publicly owned and would be bought first by CenterPoint for $47 a share. Then the entirety of Texas GenCo would be sold to GC Power Acquisition LLC, an entity owned equally by affiliates of the Blackstone Group, Hellman & Friedman LLC, Kohlberg Kravis Roberts & Co. and Texas Pacific Group.

CenterPoint said it will use its proceeds to reduce debt and concentrate on its energy delivery business. As of March 31, CenterPoint had a total of $10.71 billion in long-term debt.


For more in depth analysis check this story from TheStreet.com
http://biz.yahoo.com/ts/040722/10172979_3.html

And from the Houston Chronicle:
http://www.chron.com/cs/CDA/ssistory.mpl/business/2694870

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