Carlyle Group affiliate buying 776-MW power plant in New Jersey

Red Oak Power LLC on Sept. 13 asked the Federal Energy Regulatory Commission for authorization related to the transfer to Cogentrix Red Oak Holdings LLC of 100% of the ownership interests in Red Oak Power Holdings LLC, which indirectly owns 100% of the ownership interests in Red Oak Power.

The parties intend to close this transaction as soon as possible after obtaining commission authorization. Therefore, Red Oak Power requested from FERC a 21-day comment period and commission action on this application on or before Oct. 13.

Red Oak Power owns an approximately 776 MW (summer) combined cycle, natural gas-fired facility and related interconnection facilities located in the Borough of Sayreville, Middlesex County, N.J., within the PJM Interconnection balancing authority area (BAA). The facility is located in the PJM-East submarket.

Red Oak Power has authorization to make wholesale sales of electric energy, capacity, and ancillary services at market-based rates. It is also an exempt wholesale generator (EWG) under the Public Utility Holding Company Act (PUHCA). All of the facility’s output is committed to TAQA Gen X LLC (TAQA) through a long-term tolling agreement set to expire in 2022.

Red Oak Energy is directly and wholly-owned by Red Oak Intermediate Holdings LLC, which, in turn, is directly and wholly-owned by Red Oak Holdings. Red Oak Holdings’ interests are held directly by four affiliated investment funds. Those funds are directly or indirectly wholly-owned by: Energy Capital Partners GP II LP (ECP GP II), as general partner; and various passive limited partner investors. ECP GP II, in turn, is directly owned by: Energy Capital Partners II LLC, as general partner; and various passive limited partner investors. ECP II is owned by five individuals: Douglas Kimmelman and his estate planning vehicle; Thomas Lane and his estate planning vehicle; Andrew Singer; Peter Labbat; and Tyler Reeder.

The buyer, Cogentrix Red Oak Holdings, is a wholly-owned subsidiary of Cogentrix Power Holdings IV LLC (CPH IV). The sole member of CPH IV is Carlyle Power Holdings IV LLC, which, in turn, is a wholly-owned subsidiary of Carlyle Infrastructure Partners Power III LP (CIPP III). CIPP III is controlled by its general partner, Carlyle Infrastructure General Partner LP. (CIGP). CIPP III has several passive limited partners (collectively, the Carlyle Funds), all of which are investment fund vehicles sponsored and managed by The Carlyle Group LP (The Carlyle Group), a global alternative investment management firm that is a publicly traded entity listed on NASDAQ, or affiliates of The Carlyle Group.

Red Oak Power told FERC that while Carlyle has interests in other power plants in PJM, this deal represents no market power dominance concerns.

Global alternative asset manager Carlyle Group (NASDAQ: CG) had announced on Sept. 9 that it had agreed to acquire the Red Oak plant, and has separately closed on the purchase of five power plants in California. The acquisitions were executed in conjunction with Cogentrix, acquired by Carlyle funds in late 2012, and bring the total enterprise value of power asset transactions by Carlyle since then to more than $1.2bn.

Robert Mancini, Carlyle Managing Director and Chairman of the Board of Cogentrix, said: “Since Carlyle funds acquired Cogentrix, our power team has committed approximately $600 million of equity capital. The North American power generation sector is going through an evolution, and we are seeing significant opportunities, both in the form of acquisitions and development, to create value for our investors.”

The five California power facilities, together accounting for 320 MW, include the 122-MW Midway natural gas-fired plant in Firebaugh, as well as the CalPeak portfolio of four natural gas-fired plants totaling 198 MW in Escondido, Firebaugh, San Diego and Vacaville. Carlyle is acquiring the Midway plant from an affiliate of Starwood Energy Group Global LLC and the CalPeak portfolio from the Blackstone Group LP’s GSO Capital Partners as well as affiliates of Starwood and Tyr Energy.

Mancini said: “Red Oak is an attractive investment because it benefits from stable cash flow generation and is strategically located in a market that should benefit from strong secular trends. The California plants are all highly responsive and flexible facilities that represent important resources for transmission grid support and providing reliable power during periods of peak demand within California.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.