US power producer Dynegy to acquire 19 new plants for $6.25 bn
23 August 2014
US power producer Dynergy Inc has signed two separate agreements to acquire 19 power plants tht would add 12,500 MW of coal and gas generation, from Duke Energy and Energy Capital Partners (ECP), almost doubling its existing portfolio to nearly 26,000 MW.
The Houston-based power producer has lined up $6.25 billion for the investments.
The acquisition includes $2.8 billion for 11 Duke natural gas, coal, and oil power plants in Ohio, southwestern Pennsylvania, and Illinois and its retail sales business, Dynegy said in a statement yesterday.
The company would also spend $3.45 billion for Energy Capital plants in Massachusetts, Connecticut, Illinois, and Ohio, and a gas plant in Eddystone in a separate transaction.
The company is staking its future on a raft of coal plant closures that had increased demand for gas-fuelled generation, which in turn was helping push up gas prices.
The purchases strengthened its presence in the US Northeast and in New England, where prices shot up last winter on colder-than-normal weather and fuel shortages.
Bloomberg reported Dynegy is pushing the same growth strategy that saw the company slide into bankruptcy three years ago after the collapse of electricity prices.
However, chief executive officer Robert Flexon said it would be different this time around.
Flexon said in a conference call with investors yesterday that the deal would ''create more value for Dynegy shareholders with less risk.''
Flexon said in a statement announcing the deal, "The two acquisitions announced today are both exceptionally high quality portfolios that have been well managed and run by Duke and ECP employees.
''The addition of these portfolios is forecasted to significantly improve our financial outlook by tripling our 2015 Adjusted EBITDA and being massively accretive to Adjusted EBITDA and Free Cash Flow per share in 2015 and beyond.''
According to commentators, the CEO's gamble showed a bullish faith in the merchant electricity segment of the power industry.
The so-called independent generators were different from utilities that relied on regulators to set prices that provided them a reliable profit.
A Dynegy spokeswoman told The Inquirer that the company which would operate the Eddystone plant and had no plans for immediate staffing changes, though a review would occur following the deal closure.
Duke is one among several utility owners looking to divest power plants that competed for buyers on wholesale markets, rather than seeking returns from units with customers paying regulated rates.
The last of Dynegy's subsidiaries emerged from bankruptcy protection in November 2013, following a wholesale electricity prices collapse left independent power producers awash in red.