Edison Sells 10 Gas-Fired Plants

In preparation for deregulation of the state’s power industry, Southern California Edison on Monday said it sold 10 of its gas-fired power plants for $1.1 billion in one of the largest asset sales by a utility.

The Southland-area plants, which can produce a total of 7,532 megawatts, were bought by five companies from around the United States. The plants attracted 40 bidders to an auction that began a year ago.

Analysts said the total sale price--more than two times the book value of $421 million--reflected the desire by energy providers to get a jump start on selling electricity in California’s lucrative wholesale market as it is thrown open to competition beginning Jan. 1.

“It’s a foothold in the California market,” said Daniele Seitz, an electric power analyst at USB Securities in New York.

Only a handful of states around country have markets growing as quickly, Seitz said.

The facilities, all of which are at least 20 years old, were considered a relative bargain, according to analysts. Since the infrastructure and operating permits are already in place, it is cheaper for power companies to buy existing sites and upgrade them rather than build new ones.

“It’s a way to learn how to compete, without making a multibillion-dollar investment,” said Doug Fischer, an electric utility analyst at A.G. Edwards & Sons.

To encourage competition in a deregulated market, the California Public Utilities Commission last year required that Edison and Pacific Gas & Electric sell at least half of their fossil-fuel-powered generating stations. Both companies planned to sell nearly all such facilities.

“We looked at the gas-fired facilities as a total portfolio. We didn’t want to decide which half would go,” said Steve Frank, president of SoCal Edison, a subsidiary of Rosemead-based Edison International.

Arlington, Va.-based AES purchased three generating plants--the Alamitos station in Long Beach, one in Huntington Beach and one in Redondo Beach--for $781 million.

Houston-based Houston Industries purchased four plants for $237 million: the Coolwater plant in Barstow, the Mandalay plant in Ventura, the Ellwood site in Goleta and the Etiwanda plant in San Bernardino.

“We plan to be a significant player in this market, and this acquisition is an important step,” said Houston Industries Chief Executive Don Jordon in a statement.

Waltham, Mass.-based Thermo Ecotek acquired two stations in San Bernardino for a total of $9.5 million.

NRG Energy, based in Minneapolis, and Destec Energy, of Houston, together purchased a site in El Segundo for $87.75 million.

Edison’s two remaining gas-powered plants--one in Long Beach and one in Oxnard--remain on the auction block, spokeswoman Cathy Sedlik said.

Edison’s 12 gas-fired facilities currently run at about 20% capacity, Frank said. The utility currently generates most of its electricity from renewable resources and nuclear power.

It was not immediately clear whether any layoffs would occur as a result of Monday’s announcement. At least seven of the 10 plants are considered “must-run” facilities and, as required by state law, must be kept in service for the next two years to ensure power is available in their regions. The “must-run” sites are Alamitos, Ellwood, El Segundo, Huntington Beach, Mandalay, Redondo Beach and Etiwanda.

Last week, PG&E;, the state’s other major utility, announced the $501-million sale of three fossil-fuel-powered plants to Duke Energy Power Services, a subsidiary of North Carolina-based Duke Energy. The sale was in excess of the $380-million book value, said Leonard Anderson, the company’s spokesman.

Shares of Edison International lost 25 cents to close at $26.81 on the New York Stock Exchange.