ArcLight to buy major stakes in Keystone, Conemaugh coal plants

Affiliates of private equity investor ArcLight Capital Partners LLC have agreed to buy the stakes that Exelon (NYSE: EXC) has in the coal-fired Keystone and Conemaugh coal plants in Pennsylvania.

Exelon, which often touts its non-emitting nuclear capacity as the center of the company, on Oct. 29 indicated that it had such a deal, but didn’t name the buyer. But the parties on Nov. 6 filed for Federal Energy Regulatory Commission approval of the deal. Constellation Power Source Generation LLC and Exelon Generation Co. LLC are the sellers in this deal, and the buyers are Chief Keystone Power LLC and Chief Conemaugh Power LLC. These buyers are wholly-owned indirect subsidiaries of ArcLight Energy Partners Fund V LP.

Under the proposed deal, the sellers will transfer: a 31.28% undivided interest in the Conemaugh Station to Chief Conemaugh; and a 41.98% undivided interest in the Keystone Station to Chief Keystone. Following the transaction, the Exelon sellers will not hold any ownership interests in the facilities. The parties said they intend to close the transaction in December 2014, so they asked for a quick FERC approval.

The remaining undivided interests in the Keystone Station are held by PPL Montour, Duquesne Keystone LLC, Keystone Power LLC (NRG Energy), PSEG Fossil LLC and GenOn REMA (NRG) LLC.

The remaining undivided interests in the Conemaugh Station are held by PPL Montour, Conemaugh Power LLC (NRG), Duquesne Conemaugh LLC, PSEG Fossil LLC, GeOn REMA LLC (NRG), and UGI Development Co.

Incidentally, the PPL Corp. (NYSE: PPL) stakes in both plants are in the group of mostly coal-fired assets that PPL will contribute to the planned Talen Energy.

  • The Conemaugh Station is a 1,711 MW (summer/winter rating) coal-fired electric generating facility located in New Florence, Pennsylvania. The Exelon sellers have rights to about 535 MW of that capacity.
  • The Keystone Station is a 1,711 MW (summer/winter rating) coal-fired electric generating facility located in Shelocta, Pennsylvania. The Exelon sellers have rights to about 718 MW at that plant.

The ArcLight buyers intend to operate as exempt wholesale generators (EWGs) under the Public Utility Holding Company Act of 2005. Prior to consummation of the transaction, they will obtain market-based rate authorization.

The buyers are wholly-owned indirect subsidiaries of ArcLight Fund V, which is a private equity fund managed by ArcLight Capital Partners LLC. The associated ArcLight Funds are affiliated with the following entities that own or control generation capacity in the facilities’ relevant market – the PJM Interconnection balancing authority area (BAA):

  • CPV Shore LLC, which is developing and will own and operate a 725 MW combined-cycle facility located in New Jersey;
  • Panther Creek Power Operating LLC, which leases and operates a 94 MW qualifying small power production facility (QF) located in Nesquehoning, Pennsylvania; and
  • Westwood Generation LLC, the owner of a 36 MW generating facility located in Tremont, Pennsylvania.

The application noted: “The Transaction does not raise horizontal market power concerns. Buyers currently are affiliated with only 855 MW of generation capacity in the relevant market, the PJM BAA. The combination of the capacity currently owned or controlled by Buyers’ affiliates with the additional 1,253 MW that Buyers will acquire pursuant to the Transaction is 2,108 MW, which comprises only 1.2% of the total installed capacity in the PJM BAA. Such a de minimis amount of overlap in the relevant market does not raise horizontal market power concerns. Accordingly, the Transaction will not result in any new affiliation or combination of electric generating assets that could have an impact on the competitive situation in the relevant market.”

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.