CenterPoint Energy Announces Sale of Texas Genco for $3.65 Billion

Jul 21, 2004, 00:00 AM by User Not Found
Sale also includes buy-out of public shareholders Houston - July 21, 2004 - CenterPoint Energy, Inc. (NYSE: CNP) and Texas Genco Holdings, Inc. (NYSE: TGN) today announced a definitive agreement for GC Power Acquisition LLC, a newly formed entity owned in equal parts by affiliates of The Blackstone Group, Hellman & Friedman LLC, Kohlberg Kravis Roberts & Co. L.P. and Texas Pacific Group, to acquire Texas Genco, a wholesale electric power generation company, for approximately $3.65 billion in cash. The agreement includes a buy-out of Texas Genco’s public shareholders.

Sale also includes buy-out of public shareholders

Houston - July 21, 2004 - CenterPoint Energy, Inc. (NYSE: CNP) and Texas Genco Holdings, Inc. (NYSE: TGN) today announced a definitive agreement for GC Power Acquisition LLC, a newly formed entity owned in equal parts by affiliates of The Blackstone Group, Hellman & Friedman LLC, Kohlberg Kravis Roberts & Co. L.P. and Texas Pacific Group, to acquire Texas Genco, a wholesale electric power generation company, for approximately $3.65 billion in cash. The agreement includes a buy-out of Texas Genco’s public shareholders.

The transaction, subject to customary regulatory approvals, will be accomplished in two steps. The first step, expected to be completed in the fourth quarter of 2004, involves Texas Genco’s purchase of the 19 percent of its shares owned by the public for $47 per share, followed by GC Power Acquisition’s purchase of a Texas Genco unit that will be formed to own its coal, lignite and gas-fired generation plants. In the second step of the transaction, expected to take place in the first quarter of 2005 following receipt of approval by the Nuclear Regulatory Commission, GC Power Acquisition will complete the acquisition of Texas Genco, the principal remaining asset of which will then be Texas Genco’s interest in the South Texas Project nuclear facility. Total cash proceeds to CenterPoint Energy from both steps of the transaction will be approximately $2.9 billion, or $45.25 per share for its 81 percent interest in Texas Genco.

The transaction has been approved by the board of directors of CenterPoint Energy and by the board of directors of Texas Genco acting upon the unanimous recommendation of a special committee composed of independent members of the Texas Genco Board.

“We believe that the sale of Texas Genco is beneficial for both companies,” said David M. McClanahan, president and chief executive officer of CenterPoint Energy. “The sale enables CenterPoint Energy to reduce its debt and concentrate on its energy delivery businesses.

“I am also pleased that Texas Genco’s new owner is backed by some of today’s strongest private equity investment firms, which should allow it to build on the firm foundation that the management and employees of Texas Genco have established over the years. Of course it’s hard for us at CenterPoint Energy to let go of a business that has been a part of our company for so many years. But under the plan we developed in response to the 1999 Texas electric restructuring law, it is time for CenterPoint Energy to take this step,” said McClanahan.

The Blackstone Group, Hellman & Friedman LLC, Kohlberg Kravis Roberts & Co. L.P. and Texas Pacific Group said in a statement: “We have focused extensively on the energy sector and we are excited to purchase Texas Genco, one of the nation’s largest independent electric generating companies. Through Texas Genco, we are acquiring high quality coal, nuclear and gas power plants in the rapidly growing Houston market. We look forward to joining with the dedicated employees of a newly-independent Texas Genco to continue to provide outstanding service to Texas Genco’s customers while developing the nation's premier independent power generation business.”

CenterPoint Energy was advised on the transaction by Citigroup Global Markets Inc. and Baker Botts L.L.P., and the special committee of independent directors of Texas Genco was advised by RBC Capital Markets Corporation and Haynes and Boone, LLP. GC Power Acquisition LLC was advised by Goldman Sachs, Deutsche Bank and Morgan Stanley and the law firms Simpson Thacher & Bartlett LLP, Stroock & Stroock & Lavan LLP and Vinson & Elkins LLP.

CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and sales, interstate pipeline and gathering operations, and currently owns 81 percent of Texas Genco Holdings, Inc. The company serves nearly five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas. Assets total over $21 billion. With more than 11,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 130 years. For more information, visit the Web site at www.CenterPointEnergy.com.

Texas Genco Holdings, Inc., based in Houston, Texas, is one of the largest wholesale electric power generating companies in the United States with over 14,000 megawatts of generation capacity. It sells electric generation capacity, energy and ancillary services in one of the nation's largest power markets, the Electric Reliability Council of Texas (ERCOT). Texas Genco has one of the most diversified generation portfolios in Texas, using natural gas, oil, coal, lignite, and uranium fuels. The company owns and operates 60 generating units at 11 electric power-generating facilities and owns a 30.8 percent interest in a nuclear generating plant. For more information, visit our web site at www.txgenco.com.

The Blackstone Group, a private investment and advisory firm with offices in New York, Atlanta, Boston, London and Hamburg, was founded in 1985. The firm has raised a total of approximately $32 billion for alternative asset investing since its formation. Over $14 billion of that has been for private equity investing, including Blackstone Capital Partners IV, the largest institutional private equity fund at $6.45 billion. Blackstone has made private equity investments throughout the energy sector including petroleum refining, oil and gas exploration and coal mining. In addition to Private Equity Investing, The Blackstone Group's core businesses are Private Real Estate Investing, Corporate Debt Investing, Marketable Alternative Asset Management, Corporate Advisory, and Restructuring and Reorganization Advisory. For more information, visit www.blackstone.com.

Hellman & Friedman LLC is a San Francisco-based private equity investment firm with additional offices in New York City and London. Since its founding in 1984, the Firm has raised and managed approximately $5 billion of committed capital and invested in over 45 companies. Hellman & Friedman recently completed raising its fifth fund, Hellman & Friedman Capital Partners V, L.P., a $3.5 billion fund. Representative investments include Axel Springer AG (ASV GR), ProSieben Sat.1 AG (PSM GR), Formula One Holdings, Ltd, Arch Capital Group Limited (ACGL), the NASDAQ Stock Market, Inc. (NDAQ), Young & Rubicam, Inc., Western Wireless Corporation (WWCA), Franklin Resources, Inc. (BEN), and others. For more information, visit www.hf.com.

Kohlberg Kravis Roberts & Co. L.P. is one of the world's oldest and most experienced private equity firms specializing in management buyouts, with offices in New York, Menlo Park, California, and London, England. For more information, please visit www.kkr.com.

Texas Pacific Group, founded in 1993 and based in Fort Worth, TX, San Francisco, CA, and London, is a private investment partnership managing over $13 billion in assets. Over the past several years, TPG has built an industry practice focused on the energy and power sectors (Denbury Resources, Portland General Electric (pending)). Additionally, the firm seeks to invest in world-class franchises across a range of other industries, including airlines (Continental, America West), branded consumer franchises (Burger King, Del Monte, Ducati), leading retailers (Petco, J.Crew, Debenhams - UK), healthcare companies (Oxford Health Plans, Quintiles Transnational), and technology companies (ON Semiconductor, MEMC, Seagate).

This news release includes forward-looking statements. Actual events and results may differ materially from those projected. The statements in this news release regarding future financial performance and results of operations and other statements that are not historical facts are forward-looking statements. Factors that could affect actual results include the timing and impact of future regulatory and legislative decisions, effects of competition, weather variations, changes in CenterPoint Energy's or its subsidiaries' business plans, financial market conditions, the timing and extent of changes in commodity prices, particularly natural gas, the impact of unplanned facility outages and other factors discussed in CenterPoint Energy's and its subsidiaries' filings with the Securities and Exchange Commission.