Synopsis: The owner of the Morro Bay Power Plant, Dynegy, has reached agreement again to sell the company and its numerous power plants in the wake of a previous sale falling through at the last minute. Dynegy has until January 24 to solicit better purchase proposals before the latest deal closes.
The buyer is Icahn Enterprises, which has no history in the power-generation field and, financial analysts have commented, is likely to sell off Dynegy's individual assets, including the Morro Bay plant.
Icahn is a master limited partnership based in Delaware, a diversified holding company engaged in the investment management, automotive, railcar, food packaging, metals, real estate, and home fashion fields. It announced its purchase of Dynegy on December 15.
Dominick Ragone, the chief financial officer for Icahn, refused to comment on its plans for Dynegy or the Morro Bay plant.
NRG Energy, which was in the process of buying the Morro Bay plant from the Blackstone Group in August until the deal collapsed, had said it "is not contemplating any large-scale plans" for the old plant, which is now 55 years old and is operating on only one of its four generators. NRG Energy reportedly still may be interested in buying the Morro Bay, Moss Landing and Oakland plants in California, if Icahn sells the plants individually.
Charles Fishman, an analyst for Capital Partners, said Dynegy may fetch a higher value if broken apart. "A private company such as Icahn Enterprises may have flexibility that Dynegy’s board lacks, enabling it to parcel out segments of Dynegy for sale," Fishman said.
"The maximum value you would get for this company would be in breaking it apart. That would be what Carl Icahn, assuming he’s successful, is likely to do.” (Bloomberg News) Icahn is chairman of the board and primary investor in Icahn Enterprises and is known as a billionaire and sometimes corporate raider by some analysts.
The $665 million sale plus $3.95 bllion in debt is 10% higher than the Dynegy sale to the Bloomberg Group that failed in November (SLO Coast Journal article), analysts reported.
Since replacement of the Morro Bay power plant with a new one appears to be highly unlikely because of statutory, legal and probably political obstacles, the speculation has been that whoever buys the plant will be looking toward some alternative use of the 103-acre site. With NRG Energy moving heavily into renewable energy generation, such as solar, the company might have been considering use of the plant site along those lines.
For nearly two years, Ecobaun, a company headed by local resident Tom Fee, the founder and president, (Ecobaun - The Plant), has been promoting a plan to build a renewables research university campus on the plant site, which would add more than 3,000 students and faculty—not counting service personnel—to Morro Bay's population. Fee claimed to be in "partnership" with Dynegy in that project, which included removing two of the plant's generators and their 450-feet tall smokestacks and keeping one generator and stack to service a relatively small new gas-fired, air-cooled generating unit. Whether that could win approval of the California Energy Commission and California Coastal Commission remains to be seen.
Dynegy two years ago had announced plans to close the Morro Bay plant in 2015 because a then-pending new policy would phase out use of estuary, bay, or ocean water for cooling the 19 power plants along the California coast. The Morro Bay plant draws water from the Morro Bay National Estuary for cooling its generators when operating, killing countless numbers of aquatic life.
That policy was adopted last May 4 by the State Water Resources Control Board. But it contains numerous loopholes, which could allow the plant owner to continue operating with use of Estuary water for cooling until those loopholes are closed either by the board, the Legislature, or the courts.
Whether the plant owner is forced to stop using Estuary water by 2015 or before will also affect whether the city of Morro Bay will or can renew a lease with the plant owner for use of a publicly-owned beach area next to Morro Rock as an "outfall" for discharge of water used for cooling by the plant. The city receives $750,000 a year from Dynegy under a lease of that property, which expires in 2012. Dynegy has asked for an extension of the lease for two years.
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