Financial buyers are snapping up power plants faster than at any time in history. The asset shift represents an interim step in a wholesale-market transformation.
A dam broke last year, releasing a wave that even now is spreading through the U.S. power industry.
That dam held back a flood of transactions in the secondary market for power plants. Deals that had been languishing on the auction block for months suddenly surged forward in 2004, and assets began changing ownership at a torrential pace.
According to public-domain data compiled by Bodington & Co. of San Francisco, about 47,000 net megawatts of power-plant assets changed hands last year in 46 transactions valued at more than $15 billion. That's a whopping 183 percent increase over the total capacity reported for 2003, when less than 17,000 MW changed hands (see Table 1 and “Back to the Rate Base,” March 2004).
Moreover, deal sizes grew to gigantic proportions in 2004, with one deal-Texas Genco's sale to a consortium of private equity firms-totaling more than 14.5 GW. Several other deals were in the 2,000- to 6,000-MW range. In fact, the lion's share of asset sales, 60 percent, was concentrated in just five deals that totaled nearly 28 GW.