) has received approval from the Federal Energy Regulatory
Commission (FERC) for the sale of its five coal-fired power
plants in Illinois to power generator
). With this sale, the company is divesting its merchant
generation business, Ameren Energy Resources Company ("AER").
In Mar 2013, the company had announced its intention to sell the
following power plants, namely, the 410 megawatt (MW) Duck Creek
plant, 650 MW E D Edwards plant, 895 MW Coffeen plant, 1,197 MW
Newton plant and 1,002 MW Joppa coal plant.
The company is selling its merchant power plants to focus on its
regulated utilities in Missouri and Illinois. However, the deal
is subject to approval from the Illinois Pollution Control Board
on its Illinois Multi Pollutant Standard variance request. The
company expects a decision on Nov 21, 2013.
The company has also received FERC approval for Ameren's transfer
of three natural gas-fired power plants in Illinois from one
Ameren unit to another. Per this approval, Grand Tower Energy
Center, a 478 MW combined cycle facility in Grand Tower, Ill,
Elgin Energy Center, a 460 MW simple cycle facility in Elgin,
Ill, and Gibson City Energy Center, a 228 MW simple cycle
facility in Gibson City, Ill will be transferred from Ameren
Energy Generating Company (Genco) to AmerenEnergy Medina Valley
Cogen, LLC (Medina Valley). We note that this asset transfer is
not a part of the Dynergy deal.
Genco had received an initial payment of $100 million from Medina
Valley for these three centers in Mar 2013. Post approval, Genco
received an additional $37.5 million, as per the terms of the
agreement between Genco and Medina Valley.
Meanwhile, Medina Valley has entered into an agreement to sell
these three plants to Rockland Capital. The deal is expected to
close by the end of 2013. The company expects Medina Valley to
realize after-tax sale proceeds in excess of $137.5 million
inclusive of funds held in escrow two years after the closing of
the deal. Per the terms of the AER divestiture agreement, Genco
would then receive after-tax proceeds realized in excess of
These divestitures will allow the company to focus on its
rate-regulated operations and allocate capital to other higher
return opportunities. Moreover, the company will be able to focus
more on planned investments in transmission, distribution and
generation infrastructure that will ensure enhanced shareholder
Also, this transaction would enable the company to abide by the
President's fresh climate strategy laid out in June this year. It
calls for limiting pollution from existing coal-fired power
plants. We view the sale as positive for the company as the
profit from these businesses were affected by low power prices.
The company presently has a short-term Zacks Rank #3 (Hold) given
its pending regulatory cases. Stocks that are worth considering
in the space are
Alliant Energy Corporation
Brookfield Infrastructure Partners L.P.
), both with a Zacks Rank #2 (Buy).
AMEREN CORP (AEE): Free Stock Analysis Report
BROOKFIELD INFR (BIP): Free Stock Analysis
DYNEGY INC-NEW (DYN): Free Stock Analysis
ALLIANT ENGY CP (LNT): Free Stock Analysis
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