Mission Energy powering up for foreign ventures; new-power demands globally attract SCEcorp unit.

Mission Energy Co., an investor in and developer of domestic power plants, is pouring money into foreign ventures.

With no foreign plants until now, the arm of Rosemead-based SCEcorp currently has 11 projects in construction or permitting worldwide, with foreign plants to account for 65 percent of the new power to be produced over the next five years or so, according to company officials. If all projects go on-line, 37 percent of Mission's total power production would be foreign-based.

The $2.9 billion-in-assets company is responding to industry estimates that only roughly 100,000 new megawatts of power are needed in the United States by 2003, said Lehman Bros. stock analyst Paul Parshley. But five to six times more new power will be needed abroad, he said.

In late December, Mission bought a 51 percent stake in a 1,000 megawatt coal-fired plant under construction in Australia plus a 60 percent interest in a 220-megawatt gas-fired project operating in the United Kingdom, and it spent some $300 million on a 1,400-megawatt coal project in Mexico near the Texas border. Also in December it bought at stake in a Dutch holding company with hydroelectric projects in Spain.

Mission also is negotiating with Indonesia to invest $1.5 billion to $2 billion in a consortium to own four 600-megawatt coal-burning plants, said Vice President of Marketing Mark Murray. Partners would include an Indonesian private company called P.P. Batu Hitam, a unit of General Electric Co. and Mitsui & Co. Ltd. Mission is also looking into possible deals in the Philippines, Thailand, Malaysia and Taiwan, said Murray.

Domestically, Mission has 28 active power projects, in which it has a net ownership of nearly 1,500 megawatts of power, enough to supply the city of San Francisco.

Irvine-based Mission is staffed with many ex-employees of its sister company, Southern California Edison Co., the giant SCEcorp utility that sells electricity to most Southland businesses.

Last December Edison-earned expertise in operations and ownership was brought to the foreign negotiating table to help clinch deals, said Mission officials.

"We had the reputation and the resources -- and it just blossomed," explained Murray. "This wasn't always in our plan."

Indeed, Mission was spun off from SCEcorp in 1986 with a $64 million investment, primarily in existing cogeneration plants. These typically produce steam for industrial processes, plus produce surplus energy that is sold back to the local utility.

In 1989 Mission opened its first international office, in London, and it has built a small war chest of profits to use abroad. For 1992, Mission earned $89 million on gross revenues of $574 million. That healthy net profit margin of 16 percent, though, is not uncommon among independent power companies.

Abroad, an average 20 percent margin is expected and needed, said Mission Chief Financial Officer Michael F. Noel. The risks and rewards are greater, he said.

"Probably the biggest risk is sovereign risk," said Noel. "Will the government stand behind its obligations?"

For example, Mission's Australia venture is dependent on the local government-owned utility continually buying its electricity.

"If the local utility went bankrupt, or was privatized," Noel theorized, "we'd be hung out to dry." Blocking that possibility, he said, is simply the Australian government's promise to keep buying under any circumstance.

Privatization, nevertheless, is precisely what's fueling opportunities for independent investors. From London to Bangkok, dozens of governments are inviting foreign ownership of their electric utilities.

"Our data shows that there are upwards of 60 countries around the world that are looking at some form of privatization," said Murray.

"Democratization, the Berlin Wall coming down, what's happening in the (former) Soviet Union -- it just caught fire" to the benefit of foreign investment, said Noel.

Mission's competition comes from the big power-plant companies -- like U.S.-based Westinghouse Electric Corp., Seimens A.G. of Germany and British Gas -- and more than 100 other international players, said industry sources.

Still, soaring economic growth in Asia is expanding the market for all by prompting new projects. These are primarily fueled by coal, oil and gas.

Lehman Bros.' Parshley is bullish on Mission, saying it has hedged well against political turmoil, flopped plans or foreign currency volatility. "They've been as careful as you can be getting into a market that no one has any real experience in," said Parshley.