PSEG Power LLC, a subsidiary of Public Service Enterprise Group Incorporated (PEG), announced the closing of sale of its Guadalupe power plant for approximately $351 million. The plant is sold to MinnTex Power Holdings LLC and MinnTex GP LLC. Both the entities, managed by Wayzata Investment Partners LLC, have agreed to acquire 100% of the equity interests in the limited partnership that owns the Guadalupe facility in south Texas.
Earlier, in January 2011, the company had announced the sale of its Texas generating assets consisting of two 1,000 megawatt gas-fired combined cycle generating units. Guadalupe is one of the two gas-fired power plants. The company will sell its other plant, the Odessa facility, in West Texas, to High Plains Diversified Energy Corporation (“HPDEC”) in the second half of 2011. The two transactions will bring in $687 million for Public Service Enterprise. The company plans to use the cash for general corporate purposes.
In February 2011, Public Service Enterprise Group reported fourth quarter operating per share earnings of 60 cents per share, missing the Zacks Consensus Estimate of 62 cents per share. In fiscal 2010 operating earnings came in at $3.12 per share, falling short of the Zacks Consensus Estimate of $3.17. At year end, the company had cash and cash equivalents of $280 million compared with $350 million at prior-year end.
Management has taken several measures to improve financial stability and reduce the overall risk profile of Public Service. This includes opportunistically monetizing assets that no longer are a strategic fit, reducing international exposure, significantly hedging future generation business and paying down debt. However, the increasing cost of coal, higher pension and financial costs, and power-price volatility are areas of concern. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
In the near term, we would advise investors to accumulate its short-term Zacks #2 Rank (Buy rating) peers like The AES Corporation (AES) and El Paso Electric Company (EE).
Based in New Jersey, Public Service Enterprise Group is an energy company with regulated electric and natural gas distribution, independent power production, and a wide variety of domestic and international energy-related investments.
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