EPCOR Power L.P. and EPCOR Power Equity Ltd. announce agreement to acquire Morris Cogeneration LLC.
EDMONTON, Alberta - September 11, 2008 - EPCOR Power L.P. (TSX: EP.UN) (the Partnership) and EPCOR Power Equity Ltd. (TSX: EPP.PR.A) (the Corporation), a subsidiary of the Partnership announced today that a definitive agreement has been signed to acquire 100 per cent equity interest in Morris Cogeneration LLC (Morris facility) from Diamond Generating Corporation and MIC Nebraska, Inc., both wholly-owned subsidiaries of Mitsubishi Corporation. The acquisition price is U.S. $77 million, subject to closing adjustments.
The Morris facility is a 177 megawatt (MW) natural gas-fired cogeneration facility located on Equistar Chemicals LP's (Equistar) chemical plant in Morris, Illinois, near Chicago. The facility began commercial operations in 1998. All of the steam and a portion of the electricity produced from the facility are sold to Equistar under the terms of a long-term energy services agreement which expires in 2023. Equistar, a wholly-owned subsidiary of Lyondell Chemical Company, produces ethylene and its co-products and derivatives including polyethylene plastic, at the Morris facility. The Morris facility also has an electric capacity agreement with Exelon Generation Company, LLC that terminates in 2011, for capacity and electricity in excess of the needs of Equistar and can participate in the PJM (Pennsylvania, New Jersey, and Maryland) market.
"The acquisition of the Morris facility is an excellent strategic fit and is expected to be modestly accretive to cash flow," said Brian Vaasjo, President of the General Partner of EPCOR Power L.P. "This facility combines the off-gas normally generated by the Equistar production process with natural gas, and efficiently combusts the mixture to simultaneously cogenerate steam and electricity, very similar to other EPCOR operated facilities. We understand the technology utilized by this plant, we support the efficiencies attributable to cogeneration, and we propose to add value to the Morris facility by leveraging on the Partnership's operating expertise and capitalizing on growth opportunities within the highly developed geographical area."
The transaction is expected to close in the fourth quarter of 2008, subject to certain closing conditions, expiration of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act and consent by a third party. The third party also has a Right of First Refusal.
Further details of the acquisition will be provided at closing. It is expected the purchase price of the acquisition will be temporarily financed under the Partnership's existing credit facilities with permanent financing to be arranged after the close of the transaction.
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's portfolio consists of 19 wholly-owned power generation assets located in Canada and the United States, a 50 per cent interest in a power generation asset in Washington State, and a 15.4 per cent interest in Primary Energy Recycling Holdings LLC (PERH). The Partnership's assets have a total net generating capacity of 1,287 megawatts and more than three million pounds per hour of thermal energy. PERH wholly owns four recycled energy assets in the United States with an aggregate generation capacity of 283 megawatts and nearly two million pounds per hour of thermal energy, and has a 50 per cent interest in a pulverized coal facility. EPCOR USA Ventures LLC, formerly Primary Energy Ventures LLC, a wholly-owned subsidiary of the Partnership, manages and operates these facilities for PERH. For more information on the Partnership, please visit: http://www.epcorpowerlp.ca/.
About EPCOR Power Equity Ltd.
The Corporation was incorporated under the laws of the Province of Alberta on June 26, 1998 and is a wholly-owned subsidiary of the Partnership. The Corporation operates as a holding company and indirectly holds all of the Partnership's business and power generation and other assets in the United States, including the Partnership's Castleton, Curtis Palmer, Manchief, Frederickson, Naval Station, North Island, Naval Training Center, Oxnard, Greeley, Kenilworth, Roxboro and Southport power generating facilities. These facilities have a total generating capacity of approximately 977 megawatts (representing approximately 75 per cent of the total generating capacity of the Partnership's assets) and approximately three million pounds per hour of thermal energy (representing 100 per cent of the total thermal energy capacity of the Partnership's assets). In addition, the Corporation holds, through a wholly-owned subsidiary, the Partnership's overall 15.4 per cent equity interest in PERH.
Forward-looking Information
Certain information in this news 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", "intend", "target", and "expect" or similar words suggest future outcomes. By their nature, such statements are subject to significant risks, assumptions and uncertainties, which could cause the Partnership's actual results and experience to be materially different than the anticipated results. The Partnership's expectation that the Morris facility transaction will be accretive to cash flow is subject to risks including its ability to successfully integrate and realize the financial benefits of the acquisition, the availability and price of energy commodities, the performance of counterparties in meeting their obligations under purchase and supply agreements, plant availability and performance, regulatory and government decisions, the future cost of permanent financing and competitive factors in the power industry. The ability of the Partnership to add value to the Morris facility is subject to risks including the Partnership's ability to successfully integrate and realize the financial benefits of the acquisition, the ability to retain and hire staff with expertise in the power industry, the availability and price of energy commodities, competitive factors in the power industry and the current and future economic conditions in North America. The expectation regarding the form of financing of this transaction is subject to risks of ongoing compliance by the Partnership with its current debt covenants, future developments within North American capital markets and the availability of permanent financing.
The material factors and assumptions used to develop these forward looking statements include management's analysis and due diligence of the Morris facility, including the related purchase and supply agreements, and the Partnership's assessment of commodity and power markets, the markets in which the Morris facility operates, and the state of the capital markets.
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.
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