There were 2 announcements today that continue to give pricing points for power plant asset valuations.
Both power plant sales/purchases had been previously announced, but today's announcements of the completion of the sales serve as a reminder that the market continues to be active in setting values of these assets.
Southern Company (NYSE:SO) announced that it had completed the purchase of a 680 MW dual fuel, simple cycle, power plant in Florida (with contracts for the power) for $206 million. This works out to a price of $300/KW ... a pretty reasonable price for a simple cycle gas-fired plant with contracts for the capacity and power.
Mirant also announced that its bankruptcy court had approved a sale of its portion of a power plant for $85 million for about 273 MW (MIR's 10-K said their 51% share fo the plant was 223 MW of 468 MW total, but the recent press release indiacted the plant was 568 MW). This is a sales price of about $300/KW also ... for a plant that has been shut down, presumably because it is not economic.
We will continue to track these sales, and highlight them, as we have in the following links:
In my opinion, these two sales are both at prices that offer a more reasonable chance for the buyers to make reasonable returns than the 1st 3 sales we cited in the Bull case for power plant asset values ... though the economics behind the MIR sale (for the buyer) remain unclear to me. In all fairness, the buyer is an Electric Coop (the equivalent of a municipal utility, whch has no investors to which it is obligated), and may just need the power and sees this purchase as a cheaper way to get that capacity without either building it or contracting for it.