New York PSC approves sale of EIF power plant interests to Ares

The New York State Public Service Commission on Jan. 13 approved a deal for EIF Management LLC to sell power plant interests in York York to Ares Holdings LP.

On Nov. 5, 2014, EIF Management LLC, Brooklyn Navy Yard Cogeneration Partners LP (BNYCP) and Ares Holdings LP requested issuance of a Declaratory Ruling deciding that Ares’ indirect acquisition of the ownership interests in BNYCP need not be reviewed further under Public Service Law (PSL) §70 and §83, or in the alternative, for an approval of the transaction under PSL §70 and §83.

Ares will acquire 100% of the ownership interests in EIF and, indirectly, BNYCP and its 315-MW electric generation and steam production facility located in Brooklyn, New York.

Petitioners described EIF as a limited liability company that manages private equity investment funds (the EIF Funds) that invest in power projects and own and control a de minimis amount of uncommitted electric power production in New York. EIF manages the EIF Funds’ indirect ownership interest in several entities that own generation facilities in New York, including: BNYCP, Selkirk Cogen Partners LP, Innovative Energy Services LLC (IES), and Seneca Energy II.

  • BNYCP is the owner of a 315-MW cogeneration facility located and operating in Kings County New York, that is lightly regulated under the PSL, and is wholly owned by the EIF Funds and controlled by EIF. Approximately 98% of BNYCP’s capacity is controlled by Consolidated Edison Co. of New York (ConEd) as the result of a long-term contract requiring BNYCP to sell the majority of its generation output to ConEd.
  • Selkirk is the owner of a 393.99-MW facility located in Selkirk, New York, which currently sells its net output into the New York Independent System Operator (NYISO) wholesale market at market-based rates.
  • IES and Seneca are the owners of five landfill gas generating facilities totaling approximately 24.8 MW (IES), and two facilities totaling about 28.8 MW (Seneca).

Ares Holdings is a limited partnership directly owned by Ares Holding Inc., Ares Owners Holding LP, and Alleghany Insurance Holdings LLC, with Ares Holding acting as general partner and the other two as limited partners. Ares Owners, in turn, is owned indirectly by individual investors, while Aries Holding is affiliated with Ares Management LP, a publicly-traded management firm controlling approximately $79bn in assets. Neither Ares nor any of its affiliates or subsidiaries currently own, operate, or control and electric generation or transmission facilities or any essential inputs to electric generation in the U.S.

The transaction will be effectuated through an upstream transfer of all the indirect ownership interests in BNYCP to Ares. As a result, Ares will become the sole indirect owner of BNYCP.

Said the Jan. 13 PSC approval: “Ares does not exercise control over electric delivery facilities (other than interconnections), or substantial influence over inputs, like fuel, into the production of generation supply within New York. As a result, those avenues to the undue exercise of vertical market power are foreclosed.”

The order also noted: “The proposed transaction does not pose the potentialfor the exercise of horizontal market power. Ares is a entrant into New York wholesale generation markets generally and is acquiring only the interests in generation already held by EIF. Additionally, post-transaction, the portion of New York City capacity that Ares will indirectly control is de minimis, and the vast majority of that capacity is committed under long-term contracts for many years into the future. Consequently, market concentration in those markets will not increase as a result of the transaction.”

Said Ares Management in an Oct. 31, 2014, announcement about this deal: “Ares Management, L.P. (NYSE: ARES) announced today that one of its subsidiaries has signed a definitive agreement to acquire Energy Investors Funds (‘EIF’), a leading asset manager in the energy infrastructure industry with approximately $4 billion of assets under management (‘AUM’) across EIF’s four commingled funds and related co-investment vehicles. The acquisition is being financed primarily with cash, including a portion of the proceeds raised from the previously announced offering of senior notes by an indirect subsidiary of Ares, and with equity interests in Ares.”

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.