International Power rights issue to fund $5.5bn deal for electricity plants

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The Independent Online

International Power announced a $5.5bn (£3.1bn) deal yesterday to acquire a portfolio of electricity generating plants across the world, lessening its dependence on the troubled US market.

International Power announced a $5.5bn (£3.1bn) deal yesterday to acquire a portfolio of electricity generating plants across the world, lessening its dependence on the troubled US market.

The purchase of the 13 power stations from Edison International will be completed in partnership with Japan's Mitsui, which will have a 30 per cent stake in the venture. International Power will hold the remaining 70 per cent. The deal involves $2.3bn for the equity, plus the assumption of $3.2bn of debt.

Philip Cox, the chief executive of International Power, said the acquisition "balanced" his company's asset portfolio, not only geographically but also because the new stations had long-term supply contracts in place.

One of the difficulties that International Power has faced in the US is that its stations supply electricity at the prevailing price, rather than under prices agreed under contract. US electricity prices have plummeted as a result of over-supply. Of the 13 power stations acquired, 11 have supply contracts in place.

International Power's investment will be $677m (£376m). The remainder of the money will come from equity from Mitsui and non-recourse debt. International Power announced a £291m rights issue to help fund the transaction at a 43 per cent discount to its closing share price on Thursday. The 13 stations have a total net generation capacity of 5.4 GW, located in nine countries, mostly in Asia and Europe, with none in the US.

International Power also announced an agreement to refinance its US business and it put out its interim results.

Following the deterioration in trading conditions in the US, International Power's business there could not support its debt structure. Under the refinancing, the company will retain full ownership of the assets. It will inject $100m to reduce the debt to $849m and the maturity of this debt has been pushed out from 2006 to 2010.

The company's half-year results saw underlying profits rise 9 per cent to £150m.

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