LS Power Equity Advisors LLC announced Nov. 1 that it has signed an agreement to acquire approximately 3,950 MW of generation resources in the northeastern U.S., through its affiliate Helix Generation LLC, from TransCanada Corp. (NYSE: TRP) for $2.2 billion in cash, subject to working capital and other adjustments.
The portfolio consists of these four generation facilities:
- Ravenswood (Queens, New York) – 2,480 MW, multiple-unit generating natural gas facility using dual fuel-capable steam turbine, combined-cycle and combustion turbine
- Ironwood (Lebanon, Pennsylvania) – 778 MW, natural gas combined-cycle facility
- Ocean State Power (Burrillville, Rhode Island) – 560 MW, natural gas combined-cycle facility
- Kibby Wind (Franklin County, Maine) – 132 MW, wind farm
“LS Power’s experience owning and operating a diverse array of generating facilities throughout the Northeast uniquely positions us to acquire this portfolio of power plants,” said Paul Segal, chief executive officer of LS Power. “Each of these assets serves a distinct and crucial role to meet the demand needs in their respective Northeast markets. Moreover, these facilities are staffed by skilled personnel that maintain safe and efficient operations for their customers. We look forward to ensuring a smooth transition of ownership and responsible stewardship of these vital assets.”
The transaction is expected to close in the first quarter of 2017, pending receipt of necessary regulatory approvals and third-party consents.
Founded in 1990, LS Power is an employee-owned, independent power company with offices in New York, New Jersey, Missouri, California and Texas. LS Power is a developer, owner, operator and investor in power generation and electric transmission infrastructure throughout the United States. Since inception, LS Power has developed, constructed, managed or acquired more than 30,000 MW of competitive power generation and 500 miles of transmission infrastructure.
TransCanada said Nov. 1 that this plant sale is part of a series of strategic initiatives. Together, they are expected to add to TransCanada’s growth portfolio, be accretive to comparable earnings per share in 2017 and thereafter, strengthen the company’s financial position and support an annual dividend growth rate at the upper end of previous guidance of 8% to 10% through 2020.
TransCanada expects to realize approximately US$3.7 billion from the monetization of its U.S. Northeast Power business. The amount is expected to be realized through the sale of Ravenswood, Ironwood, Ocean State Power and Kibby Wind to Helix Generation for US$2.2 billion and TC Hydro to Great River Hydro LLC, an affiliate of ArcLight Capital Partners LLC for US$1.065 billion. The two sale transactions are expected to close in the first half of 2017 subject to certain regulatory and other approvals and will include closing adjustments.
The planned sale to ArcLight involves 13 facilities on the Connecticut and Deerfield rivers in Vermont, New Hampshire and Massachusetts. TransCanada’s 584-MW portfolio is the largest conventional hydro system in New England. The portfolio includes the 192-MW Moore facility, the largest conventional hydro station in New England, and 12 other facilities totaling 392 MW.
Proceeds from these sales and future realization of value of the marketing business will be used to repay a portion of the US$6.9 billion senior unsecured asset bridge term loan credit facilities (Columbia bridge loan facilities) which were used to partially finance the Columbia Pipeline Group Inc. (Columbia) acquisition earlier this year.
“The sale of our merchant U.S. Northeast Power business to fund a portion of our acquisition of Columbia will further enhance the stability and predictability of our earnings and cash flow streams and support a strong and growing dividend,” said Russ Girling, TransCanada’s president and chief executive officer. “Following the sale, the proportion of TransCanada’s earnings before interest, taxes, depreciation and amortization (or EBITDA) expected to come from regulated and long-term contracted assets will exceed 95 per cent.”
TransCanada also announced Nov. 1 that it has decided to maintain its full ownership interest in a growing portfolio of natural gas pipeline assets in Mexico rather than sell a minority interest in six of these pipelines to fund a portion of the Columbia acquisition. TransCanada currently owns and operates the Guadalajara and Tamazunchale natural gas pipelines and is investing US$3.8 billion to develop and complete construction of four additional pipelines plus fund its interest in the Sur de Texas project, all of which will serve growing demand in Mexico. All projects are expected to be in-service by the end of 2018 and are underpinned by 25-year take-or-pay contracts with the Mexican utility Comisión Federal de Electricidad (CFE).
“While the sale of a minority interest in our growing natural gas pipeline footprint in Mexico was an option, we determined that we would maximize short- and long-term shareholder value by retaining our full ownership interest in these assets and instead access capital markets,” said Girling. “This will allow us to fully capture future growth associated with the portfolio, is expected to be accretive to earnings per share and is consistent with maintaining a simple corporate structure.”
TransCanada operates a network of natural gas pipelines that extends more than 90,300 kilometers (56,100 miles), tapping into virtually all major gas supply basins in North America. TransCanada is the continent’s leading provider of gas storage and related services with 664 billion cubic feet of storage capacity. A large independent power producer, TransCanada currently owns or has interests in over 10,500 MW of power generation in Canada and the United States. TransCanada is also the developer and operator of one of North America’s leading liquids pipeline systems that extends over 4,300 kilometres (2,700 miles), connecting growing continental oil supplies to key markets and refineries.