Trans-Elect to Expand Power-Grid Investments
Trans-Elect Inc., owner of high-voltage transmission lines in California, Michigan and Canada, plans to expand its power-grid investments after agreeing to be bought by two Los Angeles-based investment funds.
Closely held Trans-Elect will acquire electric transmission systems from utilities and build new power lines where existing facilities are becoming overloaded, Chairman Fred Buckman said.
U.S. lawmakers and regulators have encouraged electric utilities to sell high-voltage lines to promote competition because independent transmission owners may be less likely to inhibit access to the grid by wholesale generators. The urgency of grid improvements increased after the August 2003 blackout that left about 50 million customers without power.
“There’s been substantial and chronic under-investment in the power grid in this country, and it’s not sustainable,” said Lawrence Gilson, chairman of GFI Energy Ventures, one of the funds investing in the company. “What Trans-Elect represents is a different model to provide a path for capital to flow into these upgrades and expansions.”
Trans-Elect said Feb. 10 that GFI Energy and Oaktree Capital Management would buy out existing owners and increase the company’s capital. GFI and Oaktree will own 85% of the Reston, Va., company, and management will own most of the rest.
Gilson and Buckman declined to say how much money Trans-Elect would have to invest or provide the terms of the buyout. Trans-Elect said in the past that investors included units of ABB Ltd. and General Electric Co.
“There continues to be a substantial need for capital to flow into this space, and private equity has been very focused on helping to facilitate that,” said Kevin Genieser, an executive director in energy and utilities investment banking at Morgan Stanley. “But the vast majority of these upgrades will continue to be funded by traditional utility companies.”
Estimates of needed investment in the U.S. transmission grid through 2010 range from $27 billion to $100 billion, according to the Edison Electric Institute, a trade group.
Trans-Elect in May 2002 became the first non-utility owner of a transmission system in the U.S. when it bought Jackson, Mich.-based CMS Energy Corp.’s 5,400-mile power-transmission system for $290 million.
In California, Trans-Elect helped finance the construction of a $250-million upgrade to a transmission line known as Path 15, which allows power to be shuttled between the northern and southern parts of the state.
