The Pennsylvania Public Utility Commission (PUC) on March 11 approved the transfer of PPL Electric Utilities Corp.’s (PPL EU) indirect ownership interests in PPL Interstate Energy Co. (PPL IEC) to a planned new independent power producer called Talen Energy.
The approval also authorized the acquisition by privately-held Riverstone Holdings LLC of an indirect 35% ownership interest in Talen Energy. Riverstone and PPL Corp. (NYSE: PPL) are contributing a number of power plants, including PPL’s big Brunner Island and Montour coal plants in Pennsylvania, to the formation of Talen Energy, which is expected to go public in an IPO.
The Pennsylvania commission voted 5-0 to approve the joint application and a joint petition for settlement between PPL EU and PPL IEC. The approval provides the parties with all necessary authority to complete the PUC-jurisdictional aspect of the transaction.
This transaction is part of a larger spinoff, during which PPL Corp. will transfer its electric generation and retail electric and gas supply business lines – PPL Energy Supply LLC; PPL EnergyPlus LLC; and PPL Generation LLC, which owns PPL IEC – to the share owners of PPL Corp., and will immediately combine with the competitive generation assets controlled by Riverstone Holdings.
PPL Electric Utilities, which provides electric distribution service to approximately 1.4 million customers in Pennsylvania, is not affected by this transaction.
PPL Corp. noted in a March 11 statement that PUC approval in a state with a deregulated power generating market was requested for two reasons. PPL Electric Utilities, which is regulated by the PUC, sought review and approval of certain changes in property rights and contracts. In addition, IEC, which operates a Pennsylvania pipeline that transports oil or natural gas to two PPL power plants in Northampton County, requested approval of a change in its ownership under the proposed transaction. The PUC has regulatory authority over the IEC pipeline.
The spinoff transaction involving PPL and the RJS Power Holdings affiliate of Riverstone was deemed approved by the Federal Energy Regulatory Commission when the parties accepted FERC’s market power mitigation requirements in January. The transaction also requires approval by the Nuclear Regulatory Commission and the U.S. Department of Justice. The transaction is expected to close in the second quarter of 2015.