Lightstone readies for power sales out of four plants to be bought from AEP

Lightstone Marketing LLC, which be marketing power from four power plants about to be bought from American Electric Power (NYSE: AEP), on Dec. 23 applied with the Federal Energy Regulatory Commission for authority to make market-based wholesale sales of capacity, energy, and ancillary services pursuant to a market-based rate tariff.

Lightstone Marketing is a wholly-owned subsidiary of Lightstone Generation LLC, which is a special purpose entity formed by ArcLight Energy Partners Fund VI LP (ArcLight Fund VI), plus Blackstone Energy Partners II NQ LP (BEP II) and Blackstone Capital Partners VII NQ LP (both subsidiaries of The Blackstone Group LP).

These companies have formed a joint venture to acquire and own four power plants and related assets from AEP Generation Resources Inc. and AEP Generating Co.

On Sept. 13, 2016, Burgundy Power LLC, as the predecessor company to Lightstone Generation, entered into an agreement with AEP for the purchase of:

  • the two-unit Gavin coal-fired station located in Cheshire, Ohio, with a summer net capacity rating of 2,665 MW that began commercial operation in 1974;
  • the two-unit, natural gas-fired Lawrenceburg combined-cycle station located in the City of Lawrenceburg, Indiana, with a summer net capacity rating of 1,120 MW that began commercial operation in 2004;
  • the six-unit natural gas-fired simple-cycle Darby station located near Mount Sterling, Ohio, with a summer capacity rating of 471 MW that began commercial operation in 2001; and
  • the natural-gas fired Waterford combined cycle station located in Waterford Township, Washington County, Ohio, with a summer net capacity rating of 866 MW that began commercial operation in August 2003.

Wholesale sales of energy, capacity and ancillary services made by three of the facilities—Gavin, Darby and Waterford—are subject to the commission’s jurisdiction and are currently made pursuant to market-based rate authorization granted to AEP Generation Resources. For the fourth facility—Lawrenceburg—AEP Generating is party to a cost-based unit power sale agreement pursuant to which it makes capacity and energy sales from Lawrenceburg to AEP Generation Resources. This unit-power sale agreement will be terminated by the parties to the agreement effective with consummation of the plant sale transaction.

Lightstone Marketing is filing the Dec. 23 application in order to secure market-based rate authority necessary to make wholesale sales of power upon consummation of the transaction. Specifically, from time to time, the power plants may make wholesale sales of power to Lightstone Marketing, who in turn will market the electricity and make wholesale sales of power into the market operated by PJM Interconnection. In addition, Lightstone Marketing may enter into other marketing agreements regarding generation capacity owned or controlled by both affiliates and unaffiliated third parties within the PJM market.

Following the closing of the transaction, Lightstone Marketing will be owned by ArcLight Fund VI (50% share of ownership) and certain Blackstone subsidiaries and affiliates (50% share of ownership). ArcLight Fund VI will hold its interest in Lightstone Marketing directly through ArcLight Burgundy Holdings LLC, a wholly-owned, direct subsidiary of ArcLight Fund VI. With respect to Blackstone’s ownership interest, BCP VII will own approximately 19% of Lightstone Marketing and BEP II will own approximately 26% of Lightstone Marketing. Certain other investment funds affiliated with Blackstone will own the remaining interest in Lightstone Marketing, which interests will not individually exceed 2% share of ownership and approximately 5% ownership in aggregate of Lightstone Marketing.

American Electric Power on Sept. 14 had announced that it has signed an agreement to sell these four competitive power plants totaling approximately 5,200 MW for about $2.17 billion to a newly formed joint venture of Blackstone (NYSE: BX) and ArcLight Capital Partners LLC.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.