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SDG&E To Sell Encina Power Plant to Dynegy, NRG Energy.

SAN DIEGO--(BUSINESS WIRE)--Dec. 14, 1998--San Diego Gas & Electric (SDG&E) announced today that Dynegy Inc. and NRG Energy Inc. have been selected as the joint winning bidder for SDG&E's 951-megawatt Encina Power Plant in Carlsbad, Calif.

Dynegy and NRG Energy will pay $356 million in cash to acquire both the plant and 17 combustion-turbine generators, which are used during times of peak electricity load.

The sales price of $356 million is 3.8 times the book value of the assets, as of Dec. 31, 1997.

"The sale of the Encina power plant is a landmark event for our company," said Edwin A. Guiles, president of SDG&E. "This sale will go a long way toward helping us fully recover our transition costs, which will provide direct and immediate benefits to both our shareholders and customers.

"This sale also marks the end of a chapter in SDG&E's storied history, completing the divestiture of all our fossil-fueled generating assets. SDG&E now has a core focus of becoming a world-class energy delivery company, ensuring the safe and reliable transmission and distribution of gas and electricity to San Diego and southern Orange Counties -- and providing the infrastructure to support California's developing competitive energy marketplace."

Proceeds from the sale of the Encina plant will be applied directly to reduce the amount of Competition Transition Charge (CTC) SDG&E customers need to pay. Over the next four years, a portion of the electric bills for customers of all of the state's investor-owned utilities is devoted to paying the CTC, which covers the utilities' past investments in generating facilities or other related assets. The more quickly that SDG&E can recoup the cost for its power plants, the faster the CTC can be eliminated from customer bills.

Under state law, Dynegy and NRG Energy will be required to contract with SDG&E for at least two years for the continued operation and maintenance of the Encina plant and the combustion turbines.

The Encina Power Plant began operation in 1954 and consists of five steam generating units. Other assets being sold along with the plant are approximately 400 acres of surrounding land, including the outer and middle sections of the Agua Hedionda Lagoon, an offshore marine terminal, a 1.7 million barrel petroleum storage facility and an on-site combustion turbine with a capacity of 14 megawatts. The sale also includes 17 combustion turbines located throughout SDG&E's service territory with a total capacity of 253 megawatts.

The sale is expected to close in the first quarter of 1999 and is subject to regulatory approvals.

On Nov. 18, 1998, SDG&E reached a final agreement to sell its 693-megawatt South Bay Power Plant in Chula Vista, Calif., to the San Diego Unified Port District. SDG&E currently has regulatory proceedings underway to auction its 20-percent interest in the San Onofre Nuclear Generating Station and 11 power-purchase contracts.

Dynegy Inc., formerly NGC Corp., is one of the leading marketers of energy products and services in North America. Through its leadership positions in energy marketing, independent power generation and gathering, processing and transportation, the company provides energy solutions to its customers primarily in North America and the United Kingdom.

NRG Energy Inc. is one of the world's leading independent power producers, specializing in the development, construction, operation, maintenance and ownership of reliable, cost-efficient and environmentally-sensitive power plants. Established in 1989, NRG is involved in over 10,500 MW of projects throughout the United States, Europe, the Pacific Rim and Latin America.

San Diego Gas & Electric (SDG&E) is a public utility that provides service to 3 million consumers through 1.2 million electric meters and 720,000 natural gas meters in San Diego and southern Orange counties. SDG&E is a subsidiary of Sempra Energy (NYSE:SRE), a Fortune 500 energy services holding company based in San Diego.
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Copyright 1998, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Publication:Business Wire
Geographic Code:1USA
Date:Dec 15, 1998
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