CenterPoint to sell Texas Genco for $3.65 bln

HOUSTON - - Power and gas utility CenterPoint Energy Inc. said recently it has signed a definitive agreement for the sale of electricity producing affiliate Texas Genco Holdings Inc. to a group of private equity investors for $3.65 billion.

Texas Genco, among the largest U.S. wholesale electric power generators, is the latest in a series of electricity assets being snapped up by private equity groups that have moved into the sector.

CenterPoint said that under terms of the deal, Texas Genco would first buy back the 19 percent of its shares that are publicly traded for $47 a share, slightly above Tuesday afternoon's price of $46.68 on the New York Stock Exchange; the stock was up 20 cents on the day.

That stake, plus CenterPoint's 81 percent holding, would then be sold in early 2005 to GC Power Acquisition LLC partnership.

GC Power, a newly formed partnership, includes equity investment firms Blackstone Group, Hellman & Friedman LLC, Kohlberg Kravis Roberts & Co. LP and Texas Pacific Group.

CenterPoint said its cash proceeds from the sale would total approximately $2.9 billion, or $45.25 per share, and would be used to pay down debt. The company's long-term debt stood at $10.8 billion at the end of March.

CenterPoint said it expects the repurchase of the Texas Genco shares to be completed in the fourth quarter, with the rest of the transaction to GC Power completed in the first quarter of 2005, pending regulatory approval.

Texas Genco operates over 14,000 megawatts of generation capacity, including a 30.8 percent interest in the South Texas Project nuclear plant. The company has mothballed 2,585 megawatts of its total output until April 2005 because of weak power margins in the Texas market.

"We have focused extensively on the energy sector and we are excited to purchase Texas Genco," GC Power said in a statement. The group declined to comment on how it would finance the deal.

CenterPoint had put Texas Genco on the market earlier this year, after Reliant Energy Inc. passed on an option to buy the generating company.

Texas Genco's shares have risen nearly 50 percent since the beginning of 2004, reaching a peak at $47.17 earlier in July.

CenterPoint Energy was advised on the transaction by Citigroup Global Markets Inc. and Baker Botts LLP, and Texas Genco was advised by RBC Capital Markets Corp. and Haynes and Boone LLP.

GC Power Acquisition LLC was advised by Goldman Sachs, Deutsche Bank and Morgan Stanley and the law firms Simpson Thacher & Bartlett LLP, Stroock & Stroock & Lavan LLP and Vinson & Elkins LLP.