Wednesday, December 12, 2012

PPL Montana's assets for sale, according to reports

Posted By on Wed, Dec 12, 2012 at 10:29 AM

Last week, Clearing Up, a subscription-only trade publication that covers Northwest energy markets, reported that PPL Montana is looking to sell all of its electricity-generation assets in the state. The article, authored by Ben Tansey, states that the company has hired the investment bank UBS to shop its portfolio of coal and hydroelectric facilities, which includes the company’s quarter-share of the Colstrip Generating Station, the second-largest coal-fired plant west of the Mississippi.

The Colstrip Generating Station

Clearing Up is the third trade publication in recent months to report that PPL Montana, a subsidiary of PPL Corp., wants to divest of its two coal plants and 11 hydroelectric plants in Montana. In September, Sparkspread reported that PPL Montana sought to sell its share in Colstrip. In November, Power Intelligence wrote that PPL Montana’s assets “are being marketed as a bundle, but PPL may entertain bids for individual assets depending on what offers come in, deal watchers say.”

PPL Montana spokesman David Hoffman declined to comment on what he calls “market rumors.”

Pat Barkey, director of the Bureau of Business and Economic Research at the University of Montana, who recently conducted an economic analysis of the Colstrip plant, says he wouldn’t be surprised if the reports prove true. He cites “lethargic electricity demand” coming off the recession, “relentless pressure from natural gas,” which is very cheap, and the uncertainty of new regulatory requirements at coal-fired plants.

“I think it’s a pretty big deal for Montana,” Barkey says. “I don’t think any of those issues will change whether PPL owns it or not.”

The Clearing Up article mentions NorthWestern Energy as one “obvious candidate” for acquiring the assets. It also notes that pending lawsuits against Coltrip’s owners may complicate a deal. On Dec. 1, the Montana Environment Information Center and the Sierra Club filed a notice of intent to sue PPL Montana and Colstrip’s other owners—Puget Sound Energy, Portland General Electric Company, Avista Corporation, PacifiCorp and NorthWestern Energy—for violating the Clean Air Act.

“You have to wonder who’s going to want these assets, and what they’re going to want to do with them, and what that might mean for Montana ratepayers,” says MEIC’s Anne Hedges. “My guess is that they want to get out of the coal business because coal is not making money. Natural gas is where the game is being played these days...Who’s going to want a dirty old coal plant?”

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