Sithe to Acquire Energy Factors Inc.

Energy Factors Inc. has signed a letter of agreement to be acquired by Sithe Energies Group, a New York-based hydroelectric plant builder and operator, for $80 million in cash, or $17.25 a share, Energy Factors said Wednesday.

Sithe will operate Energy Factors as a wholly owned subsidiary if the deal is concluded, Energy Factors Vice President Rick Kay said. Sithe’s major shareholder is Compagnie Generale des Eaux, one of France’s largest public service companies.

Energy Factors has been negotiating with several companies for “a large capital infusion” that would help the company finance planned co-generation projects, Kay said.

“Sithe was one of the parties that came forward in our discussions, and we felt they offered the best alternative,” he said.

The acquisition . . . “will help Energy Factors because they were starting to have a little trouble getting loans from banks,” said Charles Freedman, a Los Angeles-based industry analyst with Crowell, Weedon. “This (deal) would help make more projects economically feasible.”

The two companies must reach and execute a definitive agreement and gain approvals from federal regulators and Energy Factors’ shareholders. Energy Factors on Wednesday postponed its June 3 annual meeting. No new date was set.

Energy Factors develops and operates co-generation and other types of power plants that provide electrical power and thermal energy. The San Diego-based company reported $531,000 in net income and $8.8 million in revenue for the first quarter ended March 31. It reported $1.6 million in net income and $7.5 million in revenue a year ago.

Sithe agreed to make loans to Energy Factors in advance of the merger, and Energy Factors granted Sithe an option to purchase up to 1.7 million authorized but unissued shares of common stock.

Acquiring Energy Factors . . . “is a logical step in the continued growth of our independent power operation,” Sithe Chief Executive William Kriegel said.

Sithe, a French company which operates 22 hydroelectric plants in France, opened a U.S. subsidiary in New York in 1984.

It operates four hydroelectric plants in the United States, is building five additional plants and has licenses pending with the Federal Energy Regulatory Commission for 22 projects. Sithe acquired a small Boston-based hydroelectric development company in 1986.

Sithe’s 1986 U.S. revenues were “not very substantial because most of our projects are in the middle of a two-to-three-year construction period and won’t generate revenue until they’re done,” a company spokesman said.