Allentown, Pa., Utility to Take $47 Million Charge on Arizona Power Plant
The Morning Call, Allentown, Pa. --Jun. 2
Jun. 2--PPL Corp. will take a loss on an unprofitable power plant in Arizona.
"This transaction represents a good business decision for PPL,"
John R. Biggar, PPL's chief financial officer, said in a statement.
The Sundance plant, which operates primarily in periods of high energy
demand, is in Pinal County, Ariz., about 55 miles southeast of Phoenix. PPL
EnergyPlus, a subsidiary of PPL, markets the electricity produced at the plant.
The 450-megawatt plant was proposed at a time of higher-than-usual wholesale
electricity prices. In 2002, after prices fell, PPL canceled plans to build six
additional plants, mostly in Pennsylvania.
Although the Sundance plant is reliable and produces electricity under
contract for various entities throughout the Southwest, it hasn't covered its
costs, a PPL spokesman said.
"It doesn't surprise me," David Schanzer, an analyst with Janney
Montgomery Scott in Philadelphia, said of the proposed sale. Other energy
companies are also retreating from merchant generation, a business in which PPL
has been far more successful closer to home, he said.
PPL EnergyPlus, whose trading floor is in a year-old building next to the PPL
Tower in center city Allentown, buys and sells electricity heavily on the PJM
Interconnection. PJM, which coordinates the operation of the transmission grid
that covers most of Pennsylvania, represents the world's largest competitive
wholesale electricity spot market.
The sale of the Sundance power plant -- which requires regulatory approvals
by the Arizona Corporation Commission, the Federal Energy Regulatory Commission,
the U.S. Department of Justice and the Federal Trade Commission -- is expected
to close in the first quarter of 2005, Biggar said.
PPL will take a one-time charge of approximately $47 million, or 25 cents per
share, after taxes in 2004 or 2005, depending upon the status of regulatory
approvals. After the charge, the sale will boost earnings, allowing the company
to reduce its outstanding debt.
PPL stock closed at $42.91, down 24 cents, or less than 1 percent, in trading
on the New York Stock Exchange on Tuesday.
PPL controls more than 12,000 megawatts of generating capacity in the United
States and delivers electricity to nearly 5 million customers in Pennsylvania,
the United Kingdom and Latin America.
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