Dynegy and Energy Capital Partners (Energy Capital), through a newly formed joint venture, are to acquire ENGIE’s United States fossil portfolio consisting of 8,731 megawatts of generation capacity located in ERCOT, PJM, and ISO-New England.
The joint venture has secured financing for the USD3.3 billion acquisition, as well as related transaction fees and working capital, with USD2.25 billion in committed debt facilities and USD1.185 billion in equity commitments from its owners, which includes transaction fees and initial cash balance. Dynegy expects the transaction to close in the fourth quarter 2016 after meeting customary closing conditions including approval from the Federal Energy Regulatory Commission, Public Utility Commission of Texas, and expiration of Hart-Scott-Rodino waiting periods.
“Today’s acquisition continues Dynegy’s transformation that began in 2011, to build a long term sustainable portfolio in key competitive markets. This transaction is a compelling value for our shareholders as it is the right assets, in the right markets, at the right price and unlocks considerable synergy value by utilising our proven integration model and corporate platform,” says Robert C Flexon, President and CEO of Dynegy. “We partnered on this transaction with Energy Capital in order to minimize Dynegy’s equity issuance and manage balance sheet risk as access to credit markets remain exceedingly tight and in some instances unavailable. Partnering with Energy Capital, a leading and highly reputable private equity firm with whom we historically have had a very strong and positive relationship, allowed us to bring our strengths together to accomplish this acquisition that otherwise could not have been achieved by either party individually.”
“Energy Capital is very excited about the opportunity to partner with Dynegy, a company for whom we have tremendous respect and with whom we have enjoyed a strong relationship over the years. We feel this transaction represents an extremely attractive valuation point for Energy Capital to reenter the PJM, New England and ERCOT markets, which we have a long history of successfully investing in,” says Tyler Reeder, a Partner at Energy Capital. “The joint venture will benefit tremendously from Dynegy’s strong operating capabilities, commercial risk management, and focus on environmental compliance and safety. Additionally, we think the creative financing structure minimises debt capital markets risk to the joint venture. We are equally excited about our direct investment in Dynegy, a company that is led by an exceptional management team and owns one of the strongest, cleanest and most geographically diverse power plant fleets in the country.”