Centrica plc today announced that its North American subsidiary, Centrica US Holdings Inc, has entered into a binding agreement to acquire 100 per cent of the partnership interests in Frontera Generation LP (FGLP), a subsidiary of TECO Energy Inc (TECO), for a consideration of US$134 million (£70 million) in cash. FGLP owns the Frontera Power Station, a gas-fired combined-cycle 477MW power plant located in the southern region of Texas, within the area served by Centrica’s CPL Retail Energy subsidiary. Frontera is a 100 per cent merchant plant and is debt free.
The purchase price is equivalent to US$281 (£147) per kilowatt and is the second power station Centrica has bought in Texas this year, following the acquisition of the Bastrop Energy Center in June. As a result, Centrica will be able to meet approximately 25 per cent of projected peak demand in Texas for 2005 from its own assets. This is another step towards the target of achieving at least 35 per cent equity cover for peak demand in Texas.
Frontera was designed to run flexibly and has proved this capability by running on a daily dual cycle basis since commissioning of the full plant in May 2000. This type of operation is well aligned with Centrica’s retail load in Texas, where the company currently has over 800,000 residential and commercial customers.
Sir Roy Gardner, Chief Executive of Centrica, said: "Today’s acquisition is in line with our risk management strategy of meeting the optimal proportion of our energy requirements from our own generation. And, as with previous power station acquisitions, in the UK and North America, our decision to wait for prices to soften means we have acquired a modern station for less than half the cost of building a new plant."
Completion is expected by the end of 2004 and is subject to approval by the Federal Trade Commission and the Department of Justice.