Dive Brief:
- Blackstone Group LP and Riverstone Holdings LLC have reportedly submitted a joint bid on Duke Energy Corp.'s portfolio of 11 power plants in Ohio, Illinois and Pennsylvania, which are expected to be sold for as much as $2.5 billion.
- Private-equity firm Energy Investors Funds and a second unnamed energy-focused private-equity firm have also reportedly submitted first round bids.
- Sources say the potential buyers expect the value of the plants' output to Midwestern energy providers like Dominion Resources Inc., First Energy Corp. and Dayton Power and Light Co. to increase as demand for electricity rebounds and power prices go up.
Dive Insight:
Citigroup Inc. and Morgan Stanley Inc. are advising Duke on the sale.
Blackstone recently acquired three gas-fired power stations in Texas from Centrica PLC's U.S. unit Direct Energy for $685 million.
American Electric Power, which is considering the sale of its unregulated AEP Generation Resources subsidiary and its ten gigawatts of fossil capacity, will be watching this sale closely, as will other utilities burdened with aging fossil generation likely to pose a problem in the face of new EPA emissions regulations.
The recent volatility in electricity prices and resource prices, driven by low cost natural gas and fuel-free wind and solar, has made it difficult for companies like Duke and AEP to stabilize earnings from generation while they and most other utilities are doing well with their regulated transmission and distribution system operations.
