Edison to Acquire 16 Illinois Power Plants for $4.8 Billion

CHICAGO —  Edison International, California’s second-largest utility, agreed Tuesday to buy 16 Illinois power plants for $4.8 billion in cash to expand into the Midwest.

The purchase from Unicom Corp., owner of Chicago’s dominant utility, would give Edison’s generating unit plants that can produce enough power to light 9.8 million homes. Edison’s Southern California Edison unit has 4.3 million customers.

Unicom is selling the plants to prepare for deregulation in Illinois. Edison’s California market was opened to competition last year, and the company also is looking for revenue sources in other states.

The Midwestern plants sold for nearly three times their book value because they can produce high returns in some months. Power prices in the Midwest jumped during a heat wave last June to $3,200 a megawatt hour, more than 125 times the previous year’s average. Six of the biggest plants in the deal are fired by coal, the cheapest fuel used to generate electricity.

Although coal-fired power plants are cheaper to operate than gas or nuclear ones, they also pollute more. Edison’s generating unit, Edison Mission Energy, said it’s confident it can operate the plants profitably while investing $200 million to cut the plants’ emissions.

“There is a bit of a trade-off here,” said Edward Muller, Edison Mission’s chief executive. “We will have to spend some money to improve the environmental performance of the plants, but we can make the economics work.”

Edison Mission has stakes in 11 California plants, which it can maintain because it’s legally separate from Southern California Edison. Edison Mission also owns plants in eight other states, and it has pledged to build 500 megawatts of gas-fired generation in Chicago.

Unicom, whose Commonwealth Edison unit has 3.4 million customers, expects a gain of $1.7 billion from the sale.

Edison International said the plants will begin to boost earnings in 2002.

In New York Stock Exchange trading, shares of Rosemead-based Edison rose 13 cents to close at $24.75, and Unicom shares fell 6 cents to close at $38.25.