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In separate deals involving more than 5,000 MW of natural gas-fired electric generation capacity, Houston-based Dynegy Inc. said Friday it has signed definitive agreements worth $6.25 billion to buy 21 power plants and related businesses from Duke Energy and Energy Capital Partners (ECP).
When completed the acquisition would make Dynegy among the largest U.S. independent power producers with nearly 26,000 MW of capacity.
In the purchase of Duke's Midwest business, Dynegy will pay $2.8 billion in cash for ownership interests in 11 power plants (five gas, five coal and one oil), the bulk of which are in Ohio, except for one each in Illinois and Pennsylvania. For $3.45 billion, ECP is selling its interests in 10 plants spread over five states (Connecticut, Illinois, Massachusetts, Ohio, and Pennsylvania). Eight of the plants are gas-fired.
Duke characterized the deal as a milestone in its exit from the merchant power business. Dynegy said the acquisitions will help it become a major independent power player with what CEO Robert Flexon called "exceptionally high quality portfolios" that include 5,053 MW of gas-fired units and 3,793 MW of "environmentally compliant" coal generation assets.
Dynegy is also acquiring from Duke a retail electric business that will make it a retail electricity provider to residents and businesses in Illinois, Michigan, Ohio and Pennsylvania.
"The addition of these portfolios is forecasted to significantly improve our financial outlook by tripling our 2015 adjusted earnings before interest taxes depreciation amortization [EBITDA] and massively accretive to adjusted EBITDA and free cash flow per share," Flexon said.
Earlier this month, Dynegy reported a 2Q2014 net loss of $123 million, compared to a net loss of $145 million for the year-ago quarter. The company said its consolidated adjusted EBITDA was $38 million for the quarter, compared to $8 million for the second quarter last year.
On the Duke sale, five of the plants are partially owned by Dayton Power & Light (DP&L) or a combination of DP&L and American Electric Power. Their interests were not part of the sale. In the ECP purchase, Dynegy acquired nine plants from ECP's EquiPower Resources Corp. and a major Massachusetts coal-fired complex from Brayton Point Holdings LLC.
Mark Manly, president of Duke’s commercial businesses, said his company will "continue to safely operate these plants and work closely with Dynegy to obtain the regulatory approvals necessary to close the transaction."
Completion of the deals is subject to approval from the Federal Energy Regulatory Commission and antitrust clearance. Closing is expected in three to six months.