PEG Unit Sells Texas Assets - Analyst Blog

Public Service Enterprise Group, or PSEG (PEG), announced that its unit PSEG Power has entered into agreements to sell two 1,000 megawatt gas-fired generating assets in Texas.

These assets will be sold in two different transactions having a combined value of $687 million or $343 per kilowatt. The company intends to make use of the proceeds for general corporate purposes.

Of the two PSEG Power properties up for sale, the Odessa facility situated in west Texas will be purchased by High Plains Diversified Energy Corporation, a municipal utility group based in West Texas. The other asset, the Guadalupe facility situated in south Texas, will be acquired by MinnTex Power Holdings LLC, an entity managed by Wayzata Investment Partners LLC.

PSEG had treated both these assets as discontinued operations last year and expects to generate earnings of a penny from these assets in fiscal 2010. These assets generated 7.3 terawatt of power in 2010. The company expects to close the sale during the first half of 2011, subject to customary regulatory approvals.

PSEG Power's operating earnings for 2010 is expected in the range of $1,060–$1,135 million versus $1,205 million reported in previous year. The year-over-year earnings were negatively impacted by continued lower forward energy pricing, margin erosion from BGS customer migration as well as volume declines associated with other full requirement contracts.

During the third quarter earnings call, Public Service reaffirmed its fiscal 2010 earnings per share guidance range of $3.00–$3.25. The Zacks Consensus Estimates for fourth-quarter 2010, fiscal year 2010 and fiscal year 2011 are 61 cents, $3.16 per share and $2.82 per share, respectively.

Public Service Enterprise's peer First Energy Corporation (FE) recently sold its 6.65% stake in the Ohio Valley Electric Corporation to Peninsula Generation Co-operative, in order to focus its attention on building its electricity generation business.

Public Service Enterprise Group currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-term Neutral rating on the company.

Diversified Utility Public Service Enterprise Group Incorporated is based in Newark, New Jersey. The main business of the company is to supply electricity and natural gas to its commercial, residential and industrial customers primarily in the northeastern and Mid Atlantic United States.

 
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