EPCOR Power L.P. purchases interest in Washington State generation facility to be partially financed by the sale of Subscription Receipts for Partnership Units
EDMONTON, Alberta - April 7, 2006 - EPCOR Power L.P. (TSX: EP.UN) (collectively with its subsidiaries, the "Partnership") today announced that it is acquiring from EPCOR Utilities Inc. and its wholly owned subsidiaries ("EPCOR") a 100% interest in Frederickson Power L.P. ("FPLP") for an aggregate purchase price of U.S. $118.0 million. FPLP owns a 50.15% interest in the Frederickson power facility, a 249 megawatt ("MW") (nominal) single unit, natural gas-fired combined cycle generating facility, with an additional duct firing capability of 20 MW, located in Pierce County, Washington State, U.S.A. The acquisition is expected to close in the summer of 2006, subject to regulatory approvals.
The expected benefits of the acquisition include modest accretion to funds generated from operations on a per unit basis, further geographic diversification of assets, the addition of new investment grade counterparties, and extending the weighted average life of the Partnership's power purchase agreements.
FPLP's portion (50.15%, or approximately 125 MW) of the Frederickson power facility's base 249 MW generating capacity has been sold under tolling arrangements in the form of power purchase agreements expiring in 2022 to three Washington State public utility districts.
In addition, at the closing of the acquisition, EPCOR will grant to the Partnership an option to acquire a 49% interest in the development rights for a second generating unit adjacent to the Frederickson facility site, exercisable for six months after the closing of the acquisition at an exercise price of U.S. $4.0 million.
There will be no change to the remaining interest in the Frederickson power facility, which is held by Puget Sound Energy ("PSE"). PSE holds its share of the facility's capacity (49.85%, or approximately 124 MW) through its ownership of a 49.85% undivided interest in the Frederickson power facility. PSE uses its share of such capacity to serve its retail customers. Plant dispatch is coordinated with FPLP and PSE through a dispatch amendment agreement to the Power Purchase Agreements.
EPCOR will continue to operate the Frederickson power facility.
"This acquisition emerges from an earlier commitment to seek growth opportunities which are consistent with the Partnership's strategic focus," said Brian Vaasjo, President of the general partner of EPCOR Power L.P. "With long term power purchase agreements with investment grade counterparties in place and the continuation of EPCOR as the operator, this acquisition will contribute positively to the Partnership's per unit funds generated from operations and to cash available for distributions on a sustainable basis. EPCOR remains committed to maintaining its current level of interest in the Partnership."
The purchase price of the acquisition will be financed out of cash on hand, available committed lines of credit and an issue of Subscription Receipts. The Partnership expects to refinance the bank lines used for the acquisition through a public offering or private placement of debt securities on or about the date of closing of the acquisition.
The Partnership has entered into an agreement with a syndicate of underwriters co-led by BMO Nesbitt Burns Inc. and TD Securities Inc. under which the underwriters have agreed to buy 2,460,000 Subscription Receipts from the Partnership for sale to the public at a price per $33.35 per Subscription Receipt, representing an aggregate issue of $82,041,000 (the "Offering"). Each Subscription Receipt represents the right of the holder to receive one limited partnership unit of the Partnership upon closing of the acquisition. Only persons who are residents of Canada, or if partnerships are Canadian partnerships, in each case for purposes of the Income Tax Act (Canada), may purchase Subscription Receipts and limited partnership units.
EPCOR has agreed to purchase 752,760 Subscription Receipts under the Offering from the underwriters at the same price to maintain its 30.6% interest in the Partnership.
An Independent Committee of the Board of Directors of the general partner of the Partnership has determined that the price and terms of the acquisition are fair having regard to the best interests of the Partnership's unitholders, other than EPCOR and its affiliates, and has approved the acquisition subject to the satisfaction of certain conditions, including obtaining required regulatory approvals and the closing of the Offering, and has unanimously recommended that the Board of Directors approve the terms of the acquisition. In approving the acquisition, the Independent Committee obtained independent financial advice, including a fairness opinion, from Merrill Lynch & Co. The Independent Committee also obtained independent legal advice and independent engineering advice. The Board of Directors, other than the EPCOR nominated members of the Board of Directors who abstained from voting, has approved the terms of the acquisition, subject to satisfaction of the foregoing conditions.
About EPCOR Power L.P.
Established in 1997, EPCOR Power L.P. is a limited partnership organized under the laws of the Province of Ontario. The Partnership owns and operates a portfolio of 11 power generation assets in Canada and the United States with total net generating capacity of 744 megawatts. The Partnership has the highest stability ratings of any power income fund, rated STA-1 (low) by Dominion Bond Ratings Services and SR-1 by Standard & Poor's.
Forward-looking Information
Certain information in this press release is forward-looking and related to anticipated financial performance, events and strategies. When used in this context, words such as "will", "anticipate", "believe", "plan", "target" or similar words suggest future outcomes. By their nature, such statements are subject to significant risks and uncertainties, which could cause the Partnership's actual results and experience to be materially different than the anticipated results. Such risks and uncertainties include, but are not limited to, the ability of the Partnership to complete the acquisition and realize the expected benefits of the acquisition, the ability of the Partnership to complete the equity financing related to the acquisition, the ability of the Partnership to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the availability and price of energy commodities, plant availability, waste heat availability and water flows, regulatory and government decisions, competitive factors in the power industry, the current economic conditions in North America and the performance of contractors and suppliers.
Readers are cautioned not to place undue reliance on forward-looking statements as actual results could differ materially from the plans, expectations, estimates or intentions expressed in the forward-looking statements. Except as required by law, the Partnership disclaims any intention and assumes no obligation to update any forward-looking statement even if new information becomes available, as a result of future events or for any other reason.
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Investor Information: Randy Mah (866) 896-4636