Global Processing

American Electric sells plant to Dow for $64 million

September 5, 2006

American Electric Power Co., owner of the largest U.S. electricity transmission system, said it has agreed to sell its Plaquemine cogeneration plant to Dow Chemical Co. for $64 million, the Associated Press reports. American Electric will take part in gross-margin sharing for five years as part of the deal. American Electric will also reduce its long-term power supply contract with Dow in Texas by 50 megawatts. The sale is expected to close in December, and AEP expects a one-time charge of about $136 million in the third quarter. American Electric also said it retains the rights to any judgment paid by Tractebel Energy Marketing Inc., now called Suez Energy Marketing N.A. Inc., for breaching a long-term contract to buy power generated by the Plaquemine plant, based in Plaquemine, La. American Electric received a judgment of $123 million plus interest in August 2005, but the ruling is under appeal. The company said it built the plant, which started operating in 2004, because Tractabel agreed to buy "large quantities" of electricity, but when it breached the contract, "we were left to contend with attempting to sell the power into an over-built, illiquid regional market, which resulted in losses." The company then decided to sell the 800-megawatt plant.