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Dynegy, Energy Capital Partners JV to Pay $3.3B For ENGIE's U.S. Portfolio

Dynegy Inc. and Energy Capital Partners, through a newly formed joint venture, will buy ENGIE's fossil portfolio, including 8,731 MW of generation capacity in the ERCOT, PJM and ISO-New England footprints, for $3.3 billion, a deal that would increase Dynegy's natural gas and combined cycle fleet, the companies said Thursday.

"Of the 8,731 MW being acquired, more than 90% consists of natural gas-fueled plants," Dynegy said. "This joint venture further diversifies Dynegy's geographic footprint and creates a combined 35,000 MW portfolio with 43% of its capacity located in PJM, 15% in ISO New England, 13% in ERCOT, 18% in MISO, 3% in the New York ISO, and 8% in CAISO."

The transaction is expected to close in the fourth quarter, assuming customary closing conditions including approval from the Federal Energy Regulatory Commission, Public Utility Commission of Texas, and expiration of Hart-Scott-Rodino waiting periods.

The JV, named Atlas Power, is indirectly owned 65% by Dynegy and 35% by Energy Capital. The JV's five member board will consist of three representatives from Dynegy and two from Energy Capital. Dynegy will be responsible for the day-to-day management of the portfolio. As part of the joint venture agreement, Dynegy will have the right to purchase Energy Capital's interest in the JV at any time, while Energy Capital will have the ability, four years after closing, to unwind the JV either through a sale of its interest to Dynegy or a sale of the entire entity. At closing, Dynegy and Energy Capital will invest approximately $770 million and $415 million, respectively in the JV. In addition, the JV has secured $1.85 billion in secured debt financing from a consortium of banks and a $400 million junior bridge facility from Energy Capital.

Dynegy has been embroiled in a dispute over American Electric Power Co. and FirstEnergy Corp.'s proposed power purchase agreements in Ohio (see Daily GPIJan. 14; Dec. 17, 2015). Last month, Dynegy said it owned 5,400 MW at 10 different sites in Ohio and could replace the plants being subsidized under the purchase agreements by building 6,300 MW of new gas-fired plants. At least one Ohio gas-fired facility -- the 725 MW Troy plant -- is included in the proposed acquisition.

It was a busy day for France's ENGIE, which in addition to the deal with Atlas Power said it had also sold in other deals two coal-fired power plants in India and Indonesia, and acquired Oakland, CA-based OpTerra Energy Services. Through the deals, ENGIE said it was " heavily reducing its merchant generation activities and exiting coal-fired generation in the U.S." The company will retain activities related to power generation, energy efficiency services, retail electricity, small scale liquefied natural gas (LNG) and LNG infrastructures, including participation in the Cameron LNG liquefaction project currently under construction in Louisiana.

Dynegy on Wednesday reported 2015 consolidated adjusted earnings before interest, taxes, depreciation and amortization of $850 million, compared to $347 million for 2014.

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