FirstEnergy Corp. subsidiaries Allegheny Energy Supply Co. LLC (AE Supply) and Allegheny Generating Co. (AGC) have reached an agreement to sell 1,572 MW of natural gas and hydro generating assets for $925 million in cash to an affiliate of New York-based power developer LS Power Group.
The deal is expected to close in the third quarter and would be subject to customary closing conditions, including approval by the Federal Energy Regulatory Commission and other agencies. The sale includes four natural gas-fired power plants in Pennsylvania and the company’s interest in a pumped storage hydro facility in Virginia.
The 638 MW Springdale Generating Facility, the 88 MW Chambersburg Generating facility, the 88 MW Gans Generating Facility and the 45 MW Hunlock Creek plant would be sold. AGC is selling a 59% competitive interest in the Bath County Hydro facility. LS Power Equity Partners III LP subsidiary Aspen Generating LLC is acquiring the facilities. After the deal, FirstEnergy would be left with ownership or control of 15,380 MW of mostly nuclear, coal, hydro, wind and solar facilities across six states.
FirstEnergy said last year that it wants out of the competitive power generation business. It launched a strategic review to sell gas and hydroelectric units and to explore alternatives for remaining assets that make up its competitive energy services segment. The company also operates 10 regulated electric utilities in six states.
Management said the competitive generation business is deteriorating on weaker power prices, insufficient capacity auction results and a low-growth forecast. It wants to transition to a fully regulated company by 2018.
The company reached a nonbinding agreement to sell the facilities last month and initially said they would earn $885 million. The buyer was not disclosed at that time.
The 43 MW gas/oil-fired Buchanan Plant in Virginia, FirstEnergy said in December, is also expected to be marketed in a separate sales process and AE Supply is considering selling its 1,300 MW coal-fired Pleasants Plant in West Virginia. If the Buchanan sale goes through, the company would be left with just one 545 MW gas/oil-fired plant in Ohio, according to a list of assets on its website.
The company warned last year that if it couldn’t sell the gas and hydro assets, then it would be forced to close them. Management also said that if FirstEnergy Solutions — which makes up part of its competitive energy services segment — can’t extend or refinance its debt, it would be forced to seek bankruptcy protection.
The 23 employees working at the plants being sold would be offered new employment with the new owner, FirstEnergy said. The company said in a U.S. Securities and Exchange Commission filing that the sale includes $305 million of debt. The company also determined that it would record a $266 million pre-tax, non-cash impairment charge for full-year 2016 associated with the plants being sold.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |