Buying energy

FPL Energy has reached an agreement to buy British Energy’s 50% ownership in AmerGen Energy Company for $276.5 million. AmerGen currently owns three nuclear power plants in the US that produce 2,480 MW of power.

Under the terms of the agreement, an affiliate of FPL Energy will purchase 100% of the outstanding stock in British Energy US Holdings which owns a 50% interest in the AmerGen Energy Company.

The AmerGen Energy Company itself is a partnership formed in 1997 between PECO Energy and British Energy. In 2000, PECO merged with Unicom to form Exelon. AmerGen currently owns and operates the Clinton Power Station, Three Mile Island Unit 1 and the Oyster Creek Generating Station.

Under the terms of the partnership agreement and associated power purchase agreements, Exelon is obligated to purchase 100% of the output not already under contract from the AmerGen plants through the expiration of their current operating licenses.

Exelon has a 30-day right of first refusal to elect to purchase British Energy’s 50% interest in AmerGen, at the same price and on the same terms and conditions as specified in the agreement with FPL Energy. If Exelon exercises its right of first refusal and purchases the British Energy shares, FPL Energy will receive a transaction fee.

In addition, under the partnership agreement, Exelon has the right to elect to participate in the sale of British Energy’s interest in AmerGen (the ‘Tag-along Right’) on the same timetable and terms and conditions as the right of first refusal. If Exelon were to exercise its Tag-along Right, the consideration offered by FPL Energy for a 50% interest in AmerGen would be applied pro rata to the interests of British Energy and Exelon, leaving each with a 25% interest in AmerGen.

Subject to Exelon’s right of first refusal, FPL Energy expects to close the acquisition in the first quarter 2004 as soon as all regulatory approvals have been obtained. The company expects the transaction to be immediately accretive to earnings per share.

All the plants will continue to be operated by Exelon. However, according to the terms of the partnership agreement, FPL Energy will have the right to appoint three of the six representatives of the Management Committee of AmerGen that oversees the affairs of the company.

The Clinton Power Station is a 1,017MW boiling water reactor located near Clinton in Central Illinois. The plant began commercial operation in 1987 and was sold to AmerGen in late 1999. Its current operating license expires in 2026.

Three Mile Island Unit 1 is a 837MW pressurised water reactor located near Harrisburg, Pennsylvania. The plant began commercial operation in 1974 and was sold to AmerGen in late 1999. Its current operating license expires in 2014.

The Oyster Creek Generating Station is a 627MW boiling water reactor located in Lacey Township, near the New Jersey shore. The plant began commercial operation in 1969 as the first large-scale commercial nuclear power plant in the United States and was sold to AmerGen in 2000. Its current operating license expires in 2009.

The transaction is subject to various regulatory approvals including the US Federal Energy Regulatory Commission and the Nuclear Regulatory Commission, as well as US antitrust agency review.

In addition, the transaction is subject to approval by British Energy shareholders, if required, and the Secretary of State for Trade and Industry of the UK.