Taking advantage of its soaring stock price and growing electricity demand across the country, Orion Power Holdings Inc. plans to sell 13 million shares of common stock in a public offering.
The move should net the Baltimore-based energy marketer the millions it needs to build new power plants, industry analysts said yesterday.
This will be the company's second offering since going public Nov. 17, when it raised $443.5 million by selling 27,500,000 shares of common stock. Upon completion of the latest offering, the company will have 103,483,003 outstanding shares of stock.
In a prospectus filed with the Securities and Exchange Commission, company officials did not disclose the per-share price or how much money it hopes to raise. However, Orion said the money will be used to develop its 1,650-megawatt, gas-fired Kelson Ridge Generating Station in Waldorf, which will cost just under $1 billion. Start-up is scheduled for 2003.
"Orion has done really well," said Thorsten Fischer, energy economist with Economy.com. "They have a really good strategy with building plants in good regions where electricity is in short supply and demand is expected to grow. One of their big markets is in New York City, which is expected to have very tight supplies this summer.
"They should be able to sell those shares at the prevailing price," Fischer said. "I think it's good timing on their part."
After opening at $20 in its initial public offering, Orion's stock rose rapidly over the next six months to hit a high of $34 last month. And, in a recent report, the company reported first-quarter earnings that soared 82 percent compared with the corresponding period a year ago. Yesterday, the stock closed on the New York Stock Exchange at $30.85, up 64 cents.
In addition to the 13 million shares, Orion will also sell $200 million of convertible debt, according to the SEC filing. The equity offering includes approximately 10,387,077 shares to be sold by Orion and approximately 2,612,923 shares to be sold by other shareholders.
The date of the offering - which is being underwritten by Goldman Sachs and Co., Credit Suisse First Boston, Banc of America Securities, CIBC World Markets, Deutsche Banc Alex. Brown and Merrill Lynch and Co. - has not been set.
Upon completion of the offering, GS Capital Partners II, an affiliate of Goldman Sachs, will own about 33 percent of Orion's stock. In addition, Constellation Enterprises Inc., an affiliate of Baltimore energy company Constellation Energy Group Inc., and several affiliates of Mitsubishi Corp. and Tokyo Electric Power Co. will own about 27 percent.
"Clearly, it's such a hot area for nonregulated energy producers these days that [Orion] has to feel reasonably confident," said David Burks, a utilities analyst with J. J. B. Hilliard, W. L. Lyons Inc. in Louisville, Ky. "I think it's taking advantage of the electricity marketplace. It's a segment in demand right now, and they're taking advantage of a stock that has had good moves to raise some capital."
Orion, launched in March 1998, has invested nearly $4 billion in 80 power plants currently in operation with a total capacity of 5,926 megawatts. An additional 5,000 megawatts are under construction or in stages of development. In the last offering, most of the proceeds were used to acquire Columbia Electric Corp., a power -generating company building plants in West Virginia and Pennsylvania, and the construction of the Ceredo Generating Station in Wayne County, W.Va., which will begin supplying the Midwest with 500 megawatts of peaking capacity at the end of the month.
According to the prospectus, while part of the proceeds will be used to repay debt and for general corporate purposes, a major portion of the offering will be used to finance Kelson Ridge, which will be capable of serving both Washington and Baltimore.
The initial phase of 1,100 megawatts will be completed in two stages of 550 megawatts each in 2003 and 2004.
A second phase of an additional 550 megawatts is to be be completed in 2005.