The Indiana Utility Regulatory Commission on Jan. 4 approved an Oct. 12, 2016, application from AEP Generating Co. (AEG), Lightstone Generation LLC and Lawrenceburg Power LLC for AEG’s sale of a gas-fired power generating facility in Lawrenceburg, Indiana, to Lightstone Generation and Lawrenceburg Power.
This is the only Indiana plant in a package of three gas-fired power plants and one coal-fired plant that American Electric Power (NYSE: AEP) plans to sell to Lightstone. The four plants are:
- the Darby facility, a 471-MW, six-unit natural gas-fired simple-cycle station located near Mount Sterling, Ohio, that began commercial operation in 2001;
- the Gavin facility, a 2,665-MW, two-unit coal-fired station located in Cheshire, Ohio, that began commercial operation in 1974;
- the Lawrenceburg facility, which began commercial operation in 2004; and
- the Waterford facility, an 866-MW natural-gas fired combined-cycle station located in Waterford Township, Washington County, Ohio, that began commercial operation in 2003.
AEG owns and operates the Lawrenceburg Generating Facility. Lawrenceburg Power is a wholly-owned subsidiary of Lightstone Generation, and Lightstone Generation in turn is a joint venture of the Blackstone Group LP and ArcLight Capital Partners LLC.
Stephen Haynes, Senior Vice President-Strategic Initiatives and Chief Risk Officer at AEP, provided testimony to support this request for approval of the sale of the facility. He described the facility as a natural-gas-fired, combined-cycle plant with a summer net capacity of 1,096 MW. It is made up of four combustion turbine generators and two steam turbine generators.
Haynes testified that AEG acquired the facility last decade to serve the Ohio market through a power sales agreement with AEP’s Ohio Power subsidiary. Subsequently, the power sales agreement was transferred to AEP Generation Resources, and the facility began selling all of its power into the wholesale power market with no direct customers or price assurance. He further testified that AEP’s long-term strategy is to become a fully-regulated, premium energy company focused on investment in infrastructure and energy innovations, and that the present transaction advances that strategy and reduces some of the business risks associated with operating competitive generating assets.
William Lee Davis, the Lightstone entities’ Chief Executive Officer, testified that Lightstone Generation is a newly-established joint venture of Blackstone and ArcLight. Blackstone and ArcLight are two leading private equity funds focused on energy infrastructure, with significant investments and experience owning and operating power generation in North America and Europe. Combined, they have managed, owned, or operated over 38,000 MW of power generation globally, including operations in multiple U.S. competitive markets. Neither Blackstone nor ArcLight currently own any utility property in Indiana and they are not currently affiliated with any other utility in Indiana.
Davis testified that the Lightstone entities have the technical, financial, and managerial capability to properly own and operate the Lawrenceburg facility. Blackstone has invested or committed more than $48 billion of equity in 184 separate private equity transactions, with an aggregate transaction value of over $360 billion. In 2015, Blackstone reported approximately $4.65 billion in total revenues. As of 2016, Blackstone has owned and operated 20,056 MW of power generation assets globally.
ArcLight has committed over $16 billion of private equity in 99 transactions since its founding in 2001. It has deep, project-level knowledge with significant experience managing the ownership and operations of power generation facilities in North American and Europe. ArcLight has invested $8 billion in the power sector, and funds managed by ArcLight have owned interests in approximately 30,000 MW of electric generating and transmission capacity (with approximately 17,000 MW net to ArcLight’s ownership).
Davis testified that Kindle Energy LLC will provide executive and asset management services, with primary responsibility for managing the facility. Consolidated Asset Management Services (CAMS), which currently manages over 30 power plant facilities with over 8,000 MW of capacity, will provide the operating services at the facility. Eastern Generation, which owns and operates seven facilities totaling approximately 5,000 MW of capacity through its Astoria Generating, New Covert, Lincoln, Crete and Rolling Hills subsidiaries, will provide select operating and management services in connection with CAMS and will provide asset management services to ArcLight.