Scottish & Southern Energy Agreements Completed for Marchwood Power Ltd Joint Venture

Scottish and Southern Energy plc ("SSE") and ESBI (Ireland's ESB International) have completed all of the financial and legal agreements in respect of their 50:50 joint venture, Marchwood Power Ltd. This will allow construction work on the venture's new 840MW combined cycle gas turbine (CCGT) power plant in Southampton to begin early in 2007. The plant is expected to be constructed and in commercial operation in time for the winter of 2009/10.

On completion, it will take SSE's ownership interest in gas-fired power stations to almost 4,800MW and in electricity generation capacity as a whole to almost 10,500MW.

Under the agreements, the plant will be operated by Marchwood Power Ltd, which will be responsible for ensuring it is available to generate electricity as required by its customer, SSE. SSE will supply the gas for conversion into electricity at the plant, and the net carbon emissions allowances, and will sell the resulting output into the UK electricity market. In this respect, the arrangements are similar to those which apply to Seabank Power Limited, in which SSE also has a 50% stake, and which operates a 1,140MW CCGT power station near Bristol.

The plant will be built under a fixed price turnkey contract by Siemens plc, using gas turbines similar to those used at Seabank and at SSE's Peterhead Power Station. It will have one of the highest thermal efficiencies in the UK and in a typical year will meet the electricity requirements of around one million homes.

The expected capital cost for Marchwood Power Ltd is around £400m. It will be financed on a debt/equity ratio of 80:20. SSE's equity investment in the venture will, therefore, be around £40m. SSE will also provide 50% of the project debt requirements (other than the VAT and Working Capital facilities) as a lender.

The favourable location of the plant, on the coast of central southern England, means it will actually receive payments under the current arrangements for charging electricity generators for use of the electricity networks.

Ian Marchant, Chief Executive of SSE, said:

"Significant investment in UK electricity generating capacity will be required during the next 10-15 years to replace existing plant that is scheduled for closure and to maintain an acceptable margin over expected energy electricity demand. Marchwood is, therefore, a very important project for not just SSE and ESBI, but the UK as a whole.

"Its development, allied to our other investments in coal-fired power stations and in renewable energy, will help to maintain SSE's position as the electricity generator with the most diverse and flexible portfolio of assets in the UK."

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Posted 29/12/06

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