Dive Brief:
- Calgary-based AltaGas Ltd. is selling several non-core assets, including a trio of gas-fired power plants in California, to a subsidiary of private equity firm Avenue Capital to help finance its acquisition of utility company WGL Holdings.
- The Tracy, Hanford and Henrietta plants have a combined capacity of 523 MW and a purchase price of $300 million. AltaGas also sold hydro assets in the first half of the year to help fund the WGL deal.
- The deal comes amid a flurry of financial activity in the power and utility space. The value of global power and utilities deals reached an all-time high of $180 billion in the first half of the year, despite a 14% decline in the last quarter, according to an Ernst & Young report.
Dive Insight:
AltaGas is continuing to sell assets in order to pay for the WGL acquisition that closed this summer, and the deal with Avenue highlights a trend of private equity firms purchasing power plants.
AltaGas will sell the three plants to Avenue-owned Middle River Power III. The Federal Energy Regulatory Commission must approve the deal, which the companies expect to close in the fourth quarter.
The company says it has now announced or completed approximately $1.5 billion in asset sales to date, and its plan to fund the acquisition of WGL "remains firmly on track to reach the expected total targeted asset sales of at least $2 billion by fourth quarter 2018."
AltaGas has reached agreements to sell smaller-scale gas midstream and power assets in Canada to Birch Hill Equity Partners Management Inc.
Though AltaGas is selling its plants to finance a transaction, private equity firms have been buying up often-distressed power plants. Dominion Energy sold its Brayton Point coal plant to private equity firm Energy Capital Partners in 2013. The firm sold it to Dynegy who, after making improvements, sold it to to Commercial Development Co. last year.
