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Morro Bay power plant sale fizzles

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A deal that would have resulted in the sale of the aging Morro Bay power plant was scrapped on Nov. 23.

Company officials from Dynegy—which owns the plant—and The Blackstone Group announced the sale wasn’t expected to go through despite some last-minute sweetening officials believed would entice shareholders. Under the original proposal, The Blackstone Group would have bought Dynegy and its California gas-burning power plants in Morro Bay, Moss Landing, and Oakland for $4.50 per share and $4 billion of the company’s mounting debt.

Shareholders were scheduled to vote on the sale Nov. 17, but both sides delayed the proposal. Meanwhile, The Blackstone Group upped its offer to $5 per share in an attempt to sway nervous investors.

Regardless of the new proposal, indications that shareholders would vote against the sale caused both companies to back off.

The Blackstone Group Senior Managing Director David Foley pointed toward Seneca Capital for screwing the deal. One of the largest Dynegy shareholders, Seneca Capital officials came out against the sale, claiming Dynegy would be better off as a standalone company despite its dwindling finances. A Seneca Capital official declined to comment for New Times.

“While we are disappointed by Seneca Capital’s and Carl Icahn’s opposition to our ‘best and final’ proposal of $5 per share, we appreciate the efforts made by Dynegy to communicate the merits of our offer,” Foley said in a press release. “And we extend best wishes to Dynegy as it continues to pursue its exploration of strategic alternatives.”

Indeed, Dynegy is already looking for other sugar daddies. In a statement to investors, the company said it plans to “immediately commence an open strategic alternatives process to solicit proposals from potentially interested parties and carefully review its standalone restructuring alternatives.”

The company’s stock was listed at just under $5 per share as of press time, less than half its worth at the one-year high
last December.

Had the sale been approved, Dynegy would have unloaded its power plants that have come under scrutiny of state water officials. On May 4, the California State Water Resources Control Board prohibited the use of once-through cooling systems statewide. Dynegy has until the end of 2015 to retrofit its Morro Bay plant, which company officials have said they don’t plan to do.

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