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Local News

February 28, 2011

AES Somerset up for sale

AES Somerset, the biggest tax payer in Niagara County, is for sale.

Paul Hanrahan, AES President and Chief Executive Officer, disclosed that the international power producer is selling its four coal-fired plants of AES Eastern Energy. The plants are located in Somerset, Greenidge, Westover and Cayuga in New York state.

Only Somerset and Cayuga remain open. There was smoke coming from the plant on the Lake Ontario shore Monday.

Henry Sloma, the chairman of the Niagara County Industrial Development Agency, is not sure how the sale will affect Somerset and the county.

“It’s disappointing,” Sloma said.  “We need to face the reality of this. This business is in trouble. That’s why we gave concessions.”

The Barker School District, Niagara County and the Town of Somerset gave up $10 million in concessions to AES Somerset in a revised payment-in-lieu of taxes agreement. Sloma said, if a new company comes, it may want the same agreement or more. Also, there may not be a company in the market for the coal-burning plant on Lake Ontario.

“We worked hard to help this company,” Sloma said. “I don’t know how it will work.”

AES Corp., which has operations in 29 countries, made money in 2010. The corporation showed profits in Latin America and Asia, but had declines in North America and Hungary. “This helped offset the headwinds that our generation plants in North America and Hungary experienced due to fuel price pressure," said Hanrahan.

According to Bloomberg News reports, AES devalued the Eastern Energy plants by $827 million. AES was a client of Bodington & Co. of San Francisco and president Jeff Bodington said he knows nothing specific about those specific plants, but they may be worth $500 to $600 million. Bodington added, “The plants could be worthless.”

Sloma said, “If the plant is sold for low price, it may affect payments of jurisdictions. They wanted a huge concession. My guess is a new company will want this place assessed for less.”

Hanrahan’s office is located in Arlington, Va. He could not be reached for comment on the proposed sales.

The Eastern Energy sale was not totally unexpected. “There were rumors that AES was up for sale,” said Dan Engert, the Deputy Town Supervisor. “I know there’s a lot of concern of people who work in plant. We understood how volatile it is. We’ll hope for best and see how it plays out. I expect AES will honor the PILOT payment.”

Verizon, which has tentative plans to build a data center in Somerset, has exercised its option to buy AES property for the $4.5 billion project.

“Verizon has distanced themselves from AES,” Supervisor Richard Meyers said. “I’m not sure it will have any affect. We knew Eastern Energy was no longer profitable for AES. If there is a sale, it’s just a change in the parent company. I don’t see them closing down the plant. We have to see what kind of company we get in here if AES  does sell it.”

Contact reporter Bill Wolcott at 439-9222, ext. 6246.


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