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Stock and Asset Deals: Coordinating and Obtaining Regulatory Approvals and Other Requirements Involving Transfers of Permits, Leases, and Rights-Of-Way

Allison A. Davis, Kerry E. Shea, Proceedings of 47th Annual Rocky Mountain Mineral Law Institute (2001)

The power generation industry represents the third largest industry in the United States, with an estimated end-user market of over $225 billion of electricity and sales. In response to increasing customer demand for access to low-cost electricity and enhanced services, new regulatory initiatives have been and are continuing to be adopted at both the state and federal level to increase competition in the domestic power generation industry.1

As a result of a variety of factors (including deregulation of the power generation market) utilities, independent power producers, and industrial companies are disposing of and purchasing power generation facilities.

In this hypothetical transaction, a subsidiary of an independent power producer/operator (Buyer) is purchasing developed [9-4] geothermal steam fields and geothermal power plants located in California1.1 from the current owner/operator of the plants (Seller). We are assuming this is an asset transaction but, alternatively, consider purchasing the stock of the subsidiary. The purchase price is $200 million in cash. We also briefly review what regulations come into play if Buyer offers to pay with its stock instead of cash. We are assuming Buyer is a public company. The power plants have over a 500-megawatt capacity. Buyer will sell the electricity only in the wholesale and not in the retail market. Some of the