The deal announced Feb. 25 by Dynegy (NYSE: DYN) and Energy Capital Partners where they, through a newly-formed joint venture, would acquire ENGIE’s United States fossil portfolio, includes mostly gas-fired capacity, plus the Coleto Creek (635 MW net) coal plant in Texas and the NEPCO (52 MW net) coal plant in Pennsylvania.
The ENGIE portfolio consists of 8,731 MW of generation capacity located in the Electric Reliability Council of Texas, PJM Interconnection and ISO New England markets. The joint venture has secured financing for the $3.3 billion acquisition. Dynegy expects the transaction to close in the fourth quarter 2016 after meeting customary closing conditions including approval from the Federal Energy Regulatory Commission, Public Utility Commission of Texas and expiration of Hart-Scott-Rodino waiting periods.
“Today’s acquisition continues Dynegy’s transformation that began in 2011, to build a long term sustainable portfolio in key competitive markets. This transaction is a compelling value for our shareholders as it is the right assets, in the right markets, at the right price and unlocks considerable synergy value by utilizing our proven integration model and corporate platform,” said Robert C. Flexon, President and CEO of Dynegy. “We partnered on this transaction with Energy Capital in order to minimize Dynegy’s equity issuance and manage balance sheet risk as access to credit markets remain exceedingly tight and in some instances unavailable.”
“Energy Capital is very excited about the opportunity to partner with Dynegy, a company for whom we have tremendous respect and with whom we have enjoyed a strong relationship over the years. We feel this transaction represents an extremely attractive valuation point for Energy Capital to reenter the PJM, New England and ERCOT markets, which we have a long history of successfully investing in,” said Tyler Reeder, a Partner at Energy Capital. “The joint venture will benefit tremendously from Dynegy’s strong operating capabilities, commercial risk management, and focus on environmental compliance and safety. Additionally, we think the creative financing structure minimizes debt capital markets risk to the joint venture. We are equally excited about our direct investment in Dynegy, a company that is led by an exceptional management team and owns one of the strongest, cleanest and most geographically diverse power plant fleets in the country.”
The ENGIE United States fossil portfolio complements Dynegy’s existing assets in PJM and ISO New England, and provides an opportunity to establish a presence in the ERCOT market with the right assets at an attractive value. Of the 8,731 MW being acquired, more than 90% consists of natural gas-fueled plants. This joint venture further diversifies Dynegy’s geographic footprint and creates a combined 35,000 MW portfolio with 43% of its capacity located in PJM, 15% in ISO New England, 13% in ERCOT, 18% in the Midcontinent ISO, 3% in the New York ISO, and 8% in the California ISO.
The joint venture, named Atlas Power, is indirectly owned 65% by Dynegy and 35% by Energy Capital. The company will have a five member board which will consist of three representatives from Dynegy and two representatives from Energy Capital, and Dynegy will be responsible for the day-to-day management of the portfolio.
“The joint venture has been structured to enable the partners to pursue this compelling transaction despite the challenging capital markets environment we are currently experiencing. The financing plan calls for only moderate non-recourse leverage at the joint venture, and utilizes bridge financing fromEnergy Capital that will keep the entity from having to access the high yield market if it remains challenging,” said Clint Freeland, Executive Vice President and Chief Financial Offer of Dynegy.
The plants the joint venture will acquire from ENGIE are, by region:
ISO New England
- Bellingham, 100% ownership, gas-fired, combined cycle gas turbine (CCGT), 551 MW net;
- Bellingham-NEA, 50%, gas, CCGT, 150 MW net (ENGIE share);
- Blackstone, 100%, gas, CCGT, 528 MW net; and
- Milford, 100%, gas, CCGT, 163 MW net.
- Sayreville, 50% ownership, gas, CCGT, 162 MW net share;
- Armstrong, 100%, gas, combustion turbine (CT), 710 MW net;
- Calumet, 100%, gas, CT, 362 MW net;
- Pleasants, 100%, gas, CT, 365 MW net;
- Troy, 100%, gas, CT, 725 MW net;
- NEPCO (Northeastern Power Cogeneration Facility), 100%, coal, steam turbine, 52 MW net; and
- Hopewell, 100%, gas, CCGT, 399 MW net.
- Coleto Creek, 100%, coal, steam turbine, 635 MW net;
- Wharton County, 100%, gas, CT, 83 MW net;
- Ennis, 100%, gas, CCGT, 357 MW net;
- Midlothian, 100%, gas, CCGT, 1,658 MW net;
- Hays, 100%, gas, CCGT, 1,071 MW net; and
- Wise, 100%, gas, CCGT 760 MW net.
ENGiE making several moves to reduce its carbon footprint
ENGIE said Feb. 25 that it has achieved a major step in the implementation of its transformation plan to redesign and simplify its portfolio, by acquiring OpTerra Energy Services and selling 13 GW of power generation assets, of which 10 GW is exposed to commodity prices in the United States and two coal-fired plants (3 GW) located in India and Indonesia.
Said Gérard Mestrallet, Chairman and Chief Executive Officer of ENGIE, and Isabelle Kocher, Deputy CEO and Chief Operating Officer, in a joint statement: “These transactions perfectly illustrate the implementation of our transformation plan, to reduce ENGIE’s carbon footprint and its exposure to commodity prices and to focus on two of our priorities: developing a low CO2 energy mix and innovative and integrated solutions for our clients. Through the acquisition of OpTerra, ENGIE thus becomes the third US leader in energy services. With the disposals in the USA, India and Indonesia, we already realize over one third of our 3-year €15 billion portfolio rotation program, while reducing by 20% our coal-fired generation installed capacity.”
The acquisition of OpTerra Energy Services strengthens ENGIE objective to offer new and differentiated energy services to its current and prospective customers in the United States. Headquartered in Oakland, California, OpTerra employs 300 people and generated $275 million revenues in 2015. OpTerra provides a comprehensive set of energy and sustainability management services to thousands of customers.
ENGIE said Feb. 25 that it has signed two definitive agreements for the sale of its interests in 10 GW of merchant power generation capacity located in the United States:
- 8.7 GW of thermal assets (8 GW gas-fired, 0.7 GW coal-fired) to be acquired by the joint venture formed by Dynegy and Energy Capital Partners; and
- 1.2 GW of pumped-storage hydro assets (First Light) and 0.2 GW of conventional hydro assets located in Massachusetts and Connecticut, to be acquired by the Public Sector Pension Investment Board, one of Canada’s largest pension investment funds, for an enterprise value of $1.2 billion.
These transactions are fully in line with ENGIE’s ambition to reduce its exposure to merchant activities while, at the same time, reducing by 4% its coal-fired generation installed capacity. With this announcement, ENGIE is heavily reducing its merchant generation activities and exiting coal-fired generation in the U.S. In North America, ENGIE will retain activities related to power generation (mainly contracted), energy efficiency services (through Cofely, Ecova and now OpTerra), retail electricity, small scale liquefied natural gas (LNG) and LNG infrastructures, including participation in the Cameron LNG liquefaction project currently under construction.
ENGIE has also reached an agreement for the sales of its interests in Paiton and Meenakshi, two coal-fired plants located in Indonesia and India, representing 3 GW of generation capacity. By reducing ENGIE’s installed coal-fired generation capacity by 16%, this transaction marks an important step in the reduction of its worldwide CO2 emissions.
- ENGIE’s 40.5% stake in the 2-GW Paiton plant located in Indonesia will be sold to Nebras Power Q.S.C. and a combination of some of the existing Paiton shareholder(s). The deal is expected to close in the second half of 2016, subject to customary approvals and regulatory consents.
- ENGIE’s entire shareholding in Meenakshi (0.3 GW installed, 0.7 GW under construction) located in India will be sold to India Power Corporation Ltd. The deal is expected to close in the second half of 2016 subject to customary approvals and regulatory consents.
ENGIE employs 154,950 people worldwide and achieved revenues of €69.9 billion in 2015. It is listed on the Paris and Brussels stock exchanges.