The members of the Federal Energy Regulatory Commission on Nov. 30 approved an application from Talen Energy (NYSE: TLN) to add a third package of power plants that Talen has to divest under a December 2014 FERC order approving the creation of Talen.
Talen Energy moved to amend the mitigation plan to include a third divestiture option (Option 3) that combines certain assets included in the already approved Options 1 and Option 2. Under Option 3, Talen Energy would divest the Ironwood generating unit, which is part of Option 1, as well as the Crane, Holtwood, and Wallenpaupack units, which are part of Option 2. Talen Energy would retain ownership of the remaining units from Option 1 and Option 2, which are referred to as the “Sapphire Units.”
Further, consistent with the FERC order approving the creation of Talen, the Sapphire Units, if retained by Talen Energy, will be offered into the PJM Interconnection energy market within the 5004/5005 submarket at cost-based offers.
Talen Energy asserted that the new Option 3 is essentially of equivalent size, in terms of megawatts (MW) divested, and effect, in terms of market concentration, as the prior approved mitigation. Option 3 would require the divestiture of the following assets: Ironwood, 660 MW, combined cycle; Holtwood, 248 MW, hydro; Wallenpaupack, 44 MW, hydro; and Crane, 399 MW, coal.
“As explained below, we will grant Talen Energy’s Motion to Amend Mitigation because the revised mitigation proposal is consistent with the public interest and it will have a comparable effect on competition as the mitigation required by the Section 203 Order,” said the Nov. 30 FERC decision.
The Sapphire Units are owned by Sapphire Power Generation Holdings LLC, a wholly owned subsidiary of Talen Energy. The Sapphire Units include the generating facilities owned by Bayonne Plant Holding LLC, Camden Plant Holding LLC, Elmwood Park Power LLC, Newark Bay Cogeneration Partnership LP, Pedricktown Cogeneration Co. LP and York Generation Co. LLC. Option 1 requires the divestiture of Ironwood and the Sapphire Units, and Option 2 requires the divestiture of Crane, Holtwood, Wallenpaupack, and the Sapphire Units.
The facilities to be divested consisted of approximately 1,300 MW of capacity grouped into either Option 1 or Option 2. The Sapphire Units, totaling approximately 656 MW of capacity, were included in both Options 1 and 2.
In its motion to amend, Talen Energy describes complications associated with efforts to divest one of the generating units included in the Option 1 divestiture plan, namely, the Bayonne facility. Specifically, Talen asserted that the lease for the land underlying the Bayonne facility will expire on Oct. 31, 2018, and the Bayonne facility (a gas-fired cogeneration facility) must be dismantled by Nov. 1, 2019. Talen Energy further explained that, due to its inability to renew the lease beyond its present term, Bayonne has notified PJM of its intent to deactivate the Bayonne facility as of Nov. 1, 2018. Talen Energy asked the commission to approve modification of the options to include a third option, Option 3, which consists of all of the non-overlapping units in Option 1 and Option 2, such that the Bayonne facility is not included as one of the facilities being divested under Option 3.
Notable is that Talen is already making progress with these mandated divestitures:
- Talen Energy announced Oct. 23 that it reached an agreement to sell the 399-MW C.P. Crane coal-fired power plant near Baltimore, Maryland, to an affiliate of Avenue Capital Group.
- Talen Energy said Oct. 8 that it has agreed to sell three Pennsylvania plants with a combined capacity of 996 MW for $1.51 billion in gross cash proceeds. This includes the Ironwood combined-cycle, natural gas-fired plant, and the separate sale of the Holtwood and Wallenpaupack hydroelectric projects. The transactions should close in early 2016. The 704-MW Ironwood plant is being sold to a subsidiary of TransCanada (TSX, NYSE: TRP). The Holtwood and Lake Wallenpaupack hydroelectric projects, with a combined capacity of 292 MW, are being sold to a subsidiary of Brookfield Renewable Energy Partners.
In December 2014, FERC conditionally authorized, subject to mitigation, a multi-step transaction whereby the interests in PPL Energy Supply LLC’s public utility subsidiaries would be separated from PPL Corp. (NYSE: PPL), distributed to PPL Corp.’s shareowners, and combined with RJS Power Holdings LLC‘s public utility subsidiaries to form a new company, Talen Energy. Talen Energy agreed to be bound by the terms of this mitigation and the transaction was completed on June 1, 2015.