Constellation Energy Group Inc., the Baltimore-based power producer, signed an agreement to become the $1.1 billion “price to beat” for U.S. Power Generating Co.’s five Boston-area power plants.
The bid for the plants will be the price to beat in an asset auction held later this year as part of bankruptcy proceedings for Boston Generating, a unit of New York-based U.S. Power Generating, according to a Constellation statement today.
The plants, part of the third-largest power-generating portfolio in New England, are capable of producing 2,950 megawatts, enough power for about 2.4 million homes. The price values the plants at about $372 a kilowatt, according to the statement.
“They have a fairly large retail business in New England with very little, if any, power assets to back it,” Michael Worms, an analyst with BMO Capital Markets in New York, said in an interview. “Now they have some assets behind them, they don’t have to buy all the power in the market. With those, their collateral requirements will probably shrink.”
Worms rates Constellation’s shares “market perform” and doesn’t own any.
Constellation said in February it had $1 billion for acquisitions and investments. The company fell 9 cents to $30.16 at 4:01 p.m. in New York Stock Exchange composite trading.
U.S. Power Generating owns and operates 58 units in the New York and New England area, according to its website. The closely held company’s investors include affiliates of investment company Madison Dearborn Partners LLC and the family of Hunt Oil Co.’s Ray L. Hunt.
The company said in April it was seeking a buyer for Boston Generating.
Constellation said it would pay for the plants using cash and debt and the purchase would, at the current price, contribute to its earnings starting in 2011.
Credit Suisse Group AG and UBS AG were Constellation’s financial advisers, with Winston & Strawn LLP as the company’s legal adviser, according to the statement. Boston Generating’s financial advisers were JP Morgan Chase & Co and Perella Weinberg Partners. Latham & Watkins LLP provided legal advice.
U.S. Power Generating said last month it was seeking a buyer for its other power unit, Astoria Generating, which has about 2,300 megawatts of capacity and accounts for 20 percent of New York City’s power supply.