Complete Energy to Merge with GSC Acquisition in $1.3 Billion Transaction
May 12 2008 - 7:30AM
Business Wire
Complete Energy Holdings, LLC (�Complete Energy� or the �Company�)
and GSC Acquisition Company (�GSCAC�) (AMEX: GGA) announced today
that they have signed a definitive agreement to merge GSCAC with
Complete Energy, an independent power producer. GSCAC is a special
purpose acquisition company that went public in June, 2007. The
transaction values the Company at $1.3 billion and among other
things will provide Complete Energy with access to the public
capital markets. Complete Energy owns and operates two natural
gas-fired combined cycle power generation facilities. The 1,022 MW
La Paloma generating facility (�La Paloma�), located 110 miles
northwest of Los Angeles, serves energy-constrained California. The
837 MW Batesville generating facility (�Batesville�), located in
northern Mississippi, serves the Southeast region of the U.S. The
transaction values the La Paloma plant at $900 million ($881 per
kW) and the Batesville plant at $400 million ($478 per kW) on a
cash-free, debt-free basis. �This is an exciting time to invest in
the power industry. We expect strong growth in demand for
electricity in the U.S., combined with the lack of significant
investment in generation in recent years, to create opportunities
for increased value,� said Hugh Tarpley, co-founder of Complete
Energy who will continue to lead the company as CEO. �Our assets
are strategically located, highly efficient and have the potential
for expansion.� �As part of a public company, Complete Energy will
have access to capital that will enable us to accelerate our growth
strategy by pursuing acquisitions and expansion opportunities. We
are pleased to be partnering with GSCAC, a group of experienced
investment professionals with a proven track record, and to have
the continued support of The TCW Group (�TCW�), which will remain a
significant investor in our company,� said Tarpley. �Complete
Energy has strong and stable cash flow and a high quality
management team,� said Matthew Kaufman, president of GSCAC.
�Furthermore, this deal has the characteristics we believe are
essential for a successful SPAC transaction: a company that will
benefit from access to public capital as an engine for growth; an
all-equity deal that aligns the interests of management and other
current Complete Energy owners and stakeholders with those of
GSCAC�s shareholders; and a compelling opportunity to own a focused
asset play in the independent power producer sector, which is
poised for significant growth.� �We were impressed with the quality
of the Complete Energy power generation assets and are excited
about the current market dynamics in both California and the
Southeast, as well as the significant opportunity that this
portfolio provides for both brownfield expansion and acquisitions,�
said Kaufman. Under the terms of the transaction agreements, GSCAC
is expected to issue approximately $440 million of new equity to
Complete Energy�s current owners and to other holders of debt and
equity of Complete Energy subsidiaries, assume approximately $627
million of net project-level debt, and retire other debt and pay
transaction expenses of approximately $183 million, and a GSCAC
subsidiary will also issue a $50 million mezzanine note. The terms
also provide for the issuance of five million additional GSCAC
shares to the current owners and stakeholders of Complete Energy
and its subsidiaries if GSCAC�s stock price reaches $14.50, and
five million additional shares if GSCAC�s stock price reaches
$15.50 per share within five years; Complete Energy management will
receive approximately 36% of these contingent shares. As a result
of these transactions, investment funds affiliated with TCW are
expected to become GSCAC�s largest shareholders, with approximately
19% ownership; GSCAC�s existing shareholders are expected to
collectively own approximately 42% of GSCAC; and the current owners
of Complete Energy are expected to own approximately 10% of GSCAC,
in each case on a fully-diluted basis and assuming that all of the
current minority interest owners in Complete Energy's subsidiaries
participate in the transaction. Post merger, Complete Energy will
continue to be led by Hugh Tarpley and Lori Cuervo, industry
veterans and founders of the Company. Tarpley and Cuervo have more
than 45 combined years of experience managing and growing large
power generation companies. Cuervo will serve as the Company�s
president and chief operating officer. The transaction is subject
to a shareholder vote which requires that a majority of GSCAC�s
public stockholders, attending the meeting in person or by proxy,
vote in favor of the transaction and not more than 20% of the
shares (minus one share) held by public stockholders vote against
the transaction and exercise their rights to have their shares
converted into cash. The transaction is also subject to other
customary closing conditions, including regulatory approvals and
the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act. La Paloma Generating
Facility La Paloma is a 1,022 MW gas-fired, four-unit
combined-cycle facility located near Bakersfield, California,
approximately 110 miles northwest of Los Angeles. The facility is
one of the most efficient fossil-fired generation assets in
California and is geographically positioned to serve both northern
and southern California. Key growth factors include: Generation
supply is lagging strong demand growth in California, which is near
minimum required reserve margins due to strong load growth and
limited new build activity. Power revenues must increase
substantially in order to stimulate the construction of new
generating assets. Long lead time (3-5 years) for development is
likely to keep the region constrained for the foreseeable future.
Batesville Generating Facility Batesville is an 837 MW gas-fired,
three-unit combined cycle facility located in northern Mississippi,
60 miles south of Memphis, Tennessee. Batesville is strategically
located within the growing Southeastern Electric Reliability
Council (�SERC�) region with transmission interconnections with
Entergy Corporation and the Tennessee Valley Authority. All of the
facility�s output is currently sold under long-term power purchase
agreements with J. Aron & Company and the South Mississippi
Electric Power Association, providing long-term and visible future
cash flows. Key growth factors include: Improving supply/demand
balance supported by load growth as a result of above-average
population and economic growth in the southeastern U.S. SERC is
dominated by aging coal-fired generation nearing design life limits
and exposed to potential carbon legislation. Attractive long-term
contracts provide strong and stable cash flows. Additional
information about the transaction as well as Complete Energy�s
operations and historical financial information will be contained
in an investor presentation that will be made public and filed by
GSCAC with the Securities and Exchange Commission today. Conference
Call Complete Energy and GSCAC will host a conference call on
Monday, May 12, 2008 at 10 a.m. Eastern Time (ET) to discuss the
transaction. The call will be open to the public. All interested
parties should dial 888-562-3356 (within the U.S.) or 973-582-2700
(outside the U.S.) 10 to 15 minutes prior to the scheduled start of
the call. For those unable to listen to the live broadcast, a
replay will be available by dialing 800-642-1687 (within the U.S.)
or 706-645-9291 (outside the U.S.) approximately two hours after
the event. The conference ID is 47024252. Participants can also
access the teleconference via webcast available at
www.complete-energy.com or at www.GSCAC.com. UBS Investment Bank
and Citi are serving as financial advisors to GSCAC, and J.P.
Morgan Securities Inc. is serving as financial advisor to Complete
Energy. Duff & Phelps (NYSE: DUF) provided a fairness opinion
to the GSCAC Board. Legal counsel to GSCAC is Davis Polk &
Wardwell, legal counsel to Complete Energy is Vinson & Elkins
L.L.P., and legal counsel to TCW is O�Melveny & Myers LLP.
ABOUT COMPLETE ENERGY Complete Energy is an independent power
generating company established in January 2004 to acquire, own and
operate merchant and contracted electric generating facilities in
key U.S. markets. For more information, visit
www.complete-energy.com. ABOUT GSC ACQUISITION COMPANY GSC
Acquisition Company is a special purpose acquisition company formed
for the purpose of acquiring one or more businesses or assets.
GSCAC completed its initial public offering in June, 2007 and
trades on the AMEX under the ticker �GGA�. GSCAC seeks to
capitalize on the significant investing experience and contacts of
its manager GSC Group, which has approximately $22 billion in
assets under management and has invested $1.7 billion in 37 control
or shared-control situations since 1999. For more information,
visit www.GSCAC.com. ABOUT THE TCW GROUP Founded in 1971, The TCW
Group develops and manages a broad range of innovative, value-added
investment products that strive to enhance and protect clients�
wealth. The firm has approximately $130 billion in assets under
management. TCW clients include many of the largest corporate and
public pension plans, financial institutions, endowments and
foundations in the U.S., as well as a substantial number of foreign
investors and high net worth individuals. TCW is a subsidiary of
Soci�t� G�n�rale Asset Management, which has approximately $500
billion under management. TCW's Energy & Infrastructure Group
is one of the leading providers of institutional capital to the
energy sector globally with assets under management of
approximately $7 billion and capital invested in more than 200
energy projects and companies in 26 countries. The Group has a
26-year track record in the industry and operates from offices in
Los Angeles, Houston, New York, London and Sydney. FORWARD LOOKING
STATEMENTS This communication contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The words �anticipates�, �may�, �can�, �believes�,
�expects�, �projects�, �intends�, �likely�, �will�, �to be� and
other expressions that are predictions of or indicate future
events, trends or prospects and which do not relate to historical
matters identify forward-looking statements. These forward-looking
statements involve known and unknown risks, uncertainties and other
factors that may cause the actual results, performance or
achievements of GSCAC and/or Complete Energy to differ materially
from any future results, performance or achievements expressed or
implied by such forward-looking statements. All statements other
than statements of historical fact are statements that could be
deemed forward-looking statements. These risks and uncertainties
include, but are not limited to, uncertainties regarding the timing
of the proposed transaction with Complete Energy, whether the
transaction will be approved by GSCAC�s stockholders, whether the
closing conditions will be satisfied (including receipt of
regulatory approvals), as well as industry and economic conditions,
competitive, legal, governmental and technological factors. There
is no assurance that GSCAC�s or Complete Energy's expectations will
be realized. If one or more of these risks or uncertainties
materialize, or if our underlying assumptions prove incorrect,
actual results may vary materially from those expected, estimated
or projected. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
hereof. Except for our ongoing obligations to disclose material
information under the Federal securities laws, we undertake no
obligation to release publicly any revisions to any forward-looking
statements, to report events or to report the occurrence of
unanticipated events. IMPORTANT ADDITIONAL INFORMATION REGARDING
THE PROPOSED MERGER TO BE FILED WITH THE S.E.C. AND WHERE TO FIND
IT This communication is being made with respect to a proposed
merger and related transactions involving GSCAC and Complete
Energy. In connection with these proposed transactions, GSCAC
intends to file with the Securities Exchange Commission (�SEC�) a
preliminary proxy statement and to mail a definitive proxy
statement and other relevant documents to GSCAC�s stockholders. The
information contained in this communication is not complete and may
be changed. Before making any voting or investment decisions,
GSCAC�s stockholders and other interested persons are urged to
read, when it becomes available, GSCAC�s preliminary proxy
statement, and any amendments thereto, and the definitive proxy
statement in connection with GSCAC�s solicitation of proxies for
the special meeting to be held to approve the merger and any other
relevant documents filed with the SEC because they will contain
important information about Complete Energy, GSCAC and the proposed
transactions. The definitive proxy statement will be mailed to
GSCAC stockholders as of a record date to be established for voting
on the proposed merger. Stockholders and other interested persons
will also be able to obtain a copy of the preliminary and
definitive proxy statements once they are available, without
charge, at the SEC�s web site at http://www.sec.gov or by directing
a request to: GSC Acquisition Company, 500 Campus Drive, Suite 220,
Florham Park, New Jersey 07932, Facsimile: (212) 884-6184.
PARTICIPANTS IN THE SOLICITATION GSCAC and its directors and
officers may be deemed to be participants in the solicitation of
proxies to GSCAC�s stockholders in connection with the merger. A
list of the names of those directors and officers and a description
of their interests in GSCAC is contained in GSCAC�s annual report
on Form 10-K for the fiscal year ended December 31, 2007, which is
filed with the SEC, and will also be contained in GSCAC�s proxy
statement when it becomes available. GSCAC�s stockholders may
obtain additional information about the direct and indirect
interests of the participants in the acquisition, by security
holdings or otherwise, by reading GSCAC�s proxy statement and other
materials to be filed with the SEC when such information becomes
available. Nothing in this communication should be construed as, or
is intended to be, a solicitation for or an offer to provide
investment advisory services.
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