August 28, 2013 / 4:30 PM / in 6 years

Capital Power to sell three U.S. power plants to Emera

TORONTO (Reuters) - Capital Power Corp (CPX.TO) has agreed to sell its three U.S. natural gas-fired power generation facilities in New England to Emera Inc (EMA.TO) for $541 million, to stabilize earnings and reduce its exposure to risk.

Edmonton, Alberta-based Capital Power, which announced the transaction on Wednesday, said the sale of the three merchant generation facilities reflects changes in the North American power markets in recent years.

Several power companies have recently begun to sell or spin off their merchant units to focus on their rate-based regulated operations, as power prices hover near their lowest in a decade.

In March, Ameren Corp (AEE.N) agreed to sell its merchant generation business to Dynegy Inc DYN.N to focus on its rate-regulated electric, natural gas and transmission business. This deal came close on the heels of Dominion Resources Inc’s (D.N) move to sell three of its power plants.

Merchant plants operate in a deregulated market, and their owners must recover the cost of operating the plant from energy sales. Rate-based plants are built and operated by a regulated utilities to serve the companies’ retail clients.

Merchant operators have been hurt as power prices have been weak in many regions in the United States as record production from shale fields has pushed natural gas prices to decade lows. Gas was used to produce about 30 percent of U.S. electricity in 2012, up from 25 percent in 2011, according to federal data.

Emera, based in Halifax, Nova Scotia, is the main power supplier to the province, through its subsidiary Nova Scotia Power Inc.

The three plants being sold by Capital Power are Bridgeport Energy, a 520-megawatt power station in Bridgeport, Connecticut; Tiverton Power, a 265-megawatt power station in Tiverton, Rhode Island; and Rumford Power, a 265-megawatt plant in Rumford, Maine.

“The sale proceeds for the New England assets will be redeployed to reduce our merchant risk profile and provide more predictable earnings and cash flow,” Capital Power’s chief executive, Brian Vaasjo, said in a statement.

The company said it will now focus on merchant power activities in Alberta. The company said it plans to continue pursuing growth in contracted power generation across North America.

The company will wind down its commodity and energy trading business outside Alberta before year end, and close its Toronto office immediately, and its Chicago office in 2014.

Reporting by Euan Rocha; Editing by Steve Orlofsky

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