Dynegy, which operates the Roseton and Danskammer power stations in Newburgh, has accepted a $665 million takeover bid by Icahn Enterprises LP.
The Federal Trade Commission approved the sale Dec. 28, which still must receive approval from the Federal Energy Regulatory Commission and Dynegy shareholders.
Houston-based Dynegy is the nation”™s third-largest independent power producer, but it has tried to sell itself for more than two years as it struggled with mounting debt. The company has about $3.95 billion of outstanding debt and has reported losses for nine of the last 11 quarters.
On Dec. 15, Dynegy announced it had accepted a bid from Icahn for $5.50 a share, 10 percent better than a previous bid by Blackstone Group LP.
Under the agreement with Icahn, Dynegy can listen to purchase offers until Jan. 24. If no better offers are received by then, the deal can close quickly.
Icahn, who is Dynegy”™s largest individual shareholder with 9 percent of its stock, has promised to support a cash offer that exceeds his in value. He made it clear that his goal is to drive up the price of the company.
“All stockholders should benefit from the auction process, which has now begun at a price which is 10 percent higher than the last bid,” Icahn said after terms of the deal were announced.
A private company such as Icahn Enterprises may have the flexibility that Dynegy”™s board lacks, enabling it to parcel out segments of Dynegy for sale, said Charles Fishman, an analyst for Pritchard Capital Partners L.L.C. “The maximum value you would get for this company would be in breaking it apart,” he said. “That would be what Carl Icahn, assuming he”™s successful, is likely to do.”
Dynegy owns plants in seven states with the capacity to power about 9.8 million average U.S. homes. In New York, wholesale markets such as Independent System Operator buy power from Dynegy and other producers through an auction system, thus subjecting power companies to price fluctuations. Dynegy reported a net loss of $1.25 billion in 2009 and another $70 million loss in the first nine months of this year.
The company bought the Roseton and Danskammer power stations from Central Hudson in 1991, as New York was deregulating its electric supply. But 10 years later it could be challenging for Dynegy or any new owner to sell the relatively archaic Roseton and Danskammer facilities.
The 490-megawatt Danskammer power station dates to the 1950s, and its four operating generators use coal, natural gas and oil. The 1,200-megawatt Roseton power station was commissioned in 1974Â and uses natural gas and oil.
The stations, like other U.S. fossil-fuel power plants, could see increased costs from pending federal regulations tightening carbon dioxide emission standards. Power plants in New York, and especially those along the Hudson River like Roseton and Danskammer, could face additional costs if the state finalizes regulations requiring the installation of upgraded water cooling systems to replace the “once-through” systems that kill fish and raise river temperatures.
