Duke selling non-regulated Midwest fleet to Dynegy

Duke Energy (NYSE: DUK) has agreed to sell its non-regulated Midwest commercial business to Dynegy for $2.8bn in cash, which includes ownership interests in 11 power plants and Duke Energy Retail Sales, the company’s competitive retail business in Ohio.

The companies announced the deal early Aug. 22. The transaction should close either later this year or early 2015.

It was one of two deals being announced by Dynegy, as it is also buying capacity from Energy Capital Partners (ECP).

“This transaction is an important milestone in our strategy to exit the merchant generation business,” said Marc Manly, president of Duke Energy’s Commercial Businesses.

Dynegy President and CEO Robert Flexon praised the Duke employees working at the Midwest power plants. “In addition, we intend to honor the terms of the collective bargaining agreements at the plants,” Flexon said.

The Midwest generation business includes 11 merchant power plants with a capacity of approximately 6,100 MW. The plants are dispatched into the PJM wholesale power market and equipped with significant environmental controls. The plants are fully owned or partially-owned by Duke Energy Ohio and reported in the company’s Commercial Power business unit.

Nine of the power plants are located in Ohio, one is in Illinois and one in Pennsylvania. Dayton Power & Light and American Electric Power‘s (NYSE:AEP) ownership interest in some of the power plants is not included in this transaction.

The Duke Energy Ohio and Kentucky and Duke Energy Indiana regulated utilities are not a part of the transaction.

Duke announced in February that it planned to get out of the Midwest merchant market.

Facilities involved in the deal include:

** Conesville in Ohio, which is partly owned by DPL and AEP;

** Dicks Creek (natural gas) in Ohio;

** Fayette (natural gas) in Pennsylvania;

** Hanging Rock (natural gas) in Ohio;

** Killen coal plant in Ohio, partly owned by DPL;

** Lee (natural gas), located in Illinois;

** Miami Fort coal units 6 and 7, partly owned by DPL;

** Miami Fort (oil) in Ohio;

** Stuart coal plant in Ohio; partly owned by DPL and AEP;

** Washington (natural gas) in Ohio; and,

** Zimmer coal facility in Ohio, which is partly owned by DPL and AEP.

Duke Energy’s financial advisors are Citigroup and Morgan Stanley. Bracewell & Giuliani is the company’s legal advisor.

Dynegy also buying plants from Energy Capital Partners

At the same time, Houston-based Dynegy also announced that it was buying various assets from Energy Capital Partners (ECP).

Thanks to the two deals together, Dynegy will acquire 12,500 MW of coal and gas generation – almost doubling its existing portfolio to nearly 26,000 MW.

“The two acquisitions announced today are both exceptionally high quality portfolios that have been well managed and run by Duke and ECP employees,” said Dynegy’s Flexon. “The addition of these portfolios transforms Dynegy by adding considerable scale in the PJM and New England markets.”

The ECP assets include these generating facilities: Milford, Lake Road, Dighton, Masspower, Liberty, Elwood, Richland, Stryker, Kincaid and Brayton Point.

Upon closing both transactions, Dynegy will own nearly 26,000 MW of generating capacity nationally and provide retail electricity to residents and businesses in Illinois, Ohio, Pennsylvania and Michigan.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.