TransCanada to buy National Grid plant
NEW YORK, NEW YORK - TransCanada has agreed to buy a large New York power plant from utility National Grid for around $2.9 billion.
National Grid is divesting the 2,480 megawatt gas-fired Ravenswood plant to satisfy regulators after its takeover of New York utility KeySpan.
"National Grid have received a price of $1,160 per kilowatt, which is a good price - slight premium to re-investment cost," said analysts at UBS.
Ravenswood is valuable as it supplies over 20 percent of the electricity for New York City, where it is difficult to find land on which to build new capacity and demand for power is always high.
The deal, which is expected to complete this summer, will reduce TransCanada earnings for the first two years but boost profit thereafter.
The sale will generate a gain for National Grid, which said KeySpan had recorded a carrying value of $1.2 billion for the plant.
Analysts at Credit Suisse estimated National Grid would gain $2 billion in proceeds after capital gains tax and accounting for fuel stocks and lease prepayment, which would give 7 pence a share of upside to their 880 pence target price.
"We estimate the sale converts into a gross $1,170 per kilowatt valuation, slightly above our estimated newbuild cost of circa $900-$1100 per kilowatt for U.S. Combined Cycle Gas Turbines and for other recent transactions in the U.S.," they added.
Related News
UK homes can become virtual power plants to avoid outages
LONDON - This month we published our analysis of the British electricity system this winter. Our message is clear: in the base case our analysis indicates that supply margins are expected to be adequate, however this winter will undoubtedly be challenging. Therefore, all of us in the electricity system operator (ESO) are working round the clock to manage the system, ensure the flow of energy and do our bit to keep costs down for consumers.
One of the tools we have developed is the demand flexibility service. From November, this new capability will reward homes and businesses for shifting their electricity…
