A subsidiary of
) - Edison Mission Energy (EME) - received the go-ahead from the
U.S. Bankruptcy Judge Jacqueline Cox in Chicago for the proposed
asset sale plan to New Jersey-based
NRG Energy Inc.
The approval will allow EME to emerge from bankruptcy and sell
all of its assets for a price of $2.64 billion. Last month,
Edison International agreed to a nearly $1 billion settlement
that resolved the unit's tax, pension and other liabilities. Per
this settlement, Edison International will give creditors of EME
trust cash and notes worth $625 million and assume approximately
$350 million in liabilities.
In Dec 2012, Santa Ana, Calif. based EME had filed for bankruptcy
citing a collapse in power prices and mounting pollution control
costs. EME listed $5.16 billion worth of assets and $5.09 billion
of liabilities. Debt included $3.7 billion on senior unsecured
notes and $1.2 billion in debt on individual projects.
Following the sale of assets to NRG Energy, EME will remain a
subsidiary of Edison International. The divestment comprises
1,700 megawatt (MW) of wind capacity, 1,600 MW of gas-fired
capacity, 4,300 MW of coal-fired capacity and 400 MW of oil and
waste coal-fired capacity. Edison's marketing and trading
business unit will be a part of NRG Energy's asset basket. Four
Illinois coal plants, namely, Powerton (Pekin), Joliet, Waukegan
and Will County (Romeoville) also form a part of this asset
transfer to NRG.
As for NRG Energy, the EME buyout will add 2,600 MW of
fully-contracted generation, of which 1,600 MW will comprise
long-term contracts. The deal will also diversify the core
generation platform of NRG Energy by adding 1,200 MW of
contracted gas assets in California and expanding opportunities
in Pennsylvania, New Jersey and Maryland (PJM) West for its
coal-fired capacity. Furthermore, NRG Energy by virtue of the
deal will become the third largest renewable operator in the U.S.
with more than 2,900 MW of wind and solar capacities.
In June last year, President Barack Obama unveiled a fresh
climate change strategy that will likely limit pollution from
existing coal-fired power plants. He issued directives asking
environmental regulators to set up carbon pollution standards for
active plants. Coal generates about 40% of U.S. electricity while
coal plants are the largest source of carbon emissions in the
country. This came as a wake up call for all coal-fired utility
stocks, prompting them to expand their renewable basket.
Recently, Edison International reported adjusted earnings of 81
cents per share for the fourth quarter of 2013, ahead of the
Zacks Consensus Estimate of 65 cents by 24.6%. However, earnings
for the quarter were below the year-ago figure of $1.79 per
Edison International presently holds a Zacks Rank #2 (Buy). Other
well-placed utility counterparts include Zacks Ranked #1 (Strong
Public Service Enterprise Group Inc.
EDISON INTL (EIX): Free Stock Analysis Report
EXELON CORP (EXC): Free Stock Analysis Report
NRG ENERGY INC (NRG): Free Stock Analysis
PUBLIC SV ENTRP (PEG): Free Stock Analysis
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