Dynegy Inc. (NYSE: DYN) announced June 15 its intent to acquire Energy Capital Partners’ (ECP) 35% interest in the Atlas joint venture (JV), which the two companies formed in February 2016 to purchase ENGIE’s 9,058-MW U.S. fossil portfolio.
Upon completion of the ENGIE portfolio acquisition, Dynegy will own 100% of the acquired business. Under the terms of the agreement, Dynegy will acquire ECP’s stake in the JV by assuming ECP’s share of the upfront equity funding at closing, then paying ECP the revised discounted floor price of $375 million post-closing for a total transaction value of $750 million (assuming the transaction closes on Oct. 1, 2016).
When the Atlas JV was originally formed, ECP provided Dynegy with the ability to buy its 35% interest in the JV using a predetermined methodology which included a minimum floor price of 2.25x ECP’s net investment in the venture. Based on expected partner equity contributions at the time, the minimum buyout price totaled $934 million including ECP’s initial capital contribution. By taking steps to reduce the upfront capital requirement and the minimum buyout multiple, the cost of the buyout is reduced by $184 million and accelerates the full integration of the ENGIE portfolio into Dynegy’s existing business.
“As we indicated in February, Dynegy’s intent has consistently been to fully own the ENGIE U.S. fossil portfolio. The significant improvement in the financial markets since announcing the transaction in February provided an excellent opportunity for us to approach ECP about an earlier timetable,” said Robert C. Flexon, President and CEO of Dynegy. “This transaction accelerates our company’s transformation, enabling us to increase our presence further in the most desirable markets with high quality assets.”
Post-closing, the combined company will have approximately 34,700 MW of generation assets with a presence in all major competitive markets in the U.S. The company’s fleet continues to undergo a significant transition with the addition of ENGIE’s U.S. fossil portfolio and the previously announced shutdown of various coal units, resulting in a portfolio that is 71% gas and 29% coal by year-end 2017.
The acquisition of ENGIE’s U.S. fossil portfolio remains on track to close in the fourth quarter of this year.
The plants to be bought 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.