Dive Brief:
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Dynegy has reached an agreement to sell three generating plants with a total capacity of 935 MW to two different private equity groups for nearly $300 million.
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Dynegy is selling its 625 MW, gas-fired Lee Energy plant MW in Dixon, Ill., to an affiliate of Rockland Capital for $180 million. Dynegy also signed a deal to sell two intermediate gas-fired plants in Dighton and Milford, Mass., to Starwood Energy Group Global for $119 million.
- Dynegy also closed on a previously announced transaction, the sale of two dual fuel plants with a combined capacity of 1,269 MW — Armstrong in Pennsylvania and Troy in Ohio — to LS Power for $480 million.
Dive Insight:
Dynegy says the new asset sales fulfill the mitigation plan approved by the Federal Energy Regulatory Commission as a condition of Dynegy’s previous acquisition of 9,000 MW of capacity in North America from Engie for $3.3 billion.
Dynegy said the proceeds from all the asset sale will be used for debt reduction.
In a note to investors, Tudor Pickering Holt analyst Neel Mitra said that despite having the second best generating fleet among independent power producers, Dynegy is still out of favor with investors because of its 7 time debt/EBITDA leverage metric.
Investors are looking for “retail heavy/asset light” power companies, not “over leveraged, higher quality gas asset fleets.”
Dynegy's asset sale comes days after fellow merchant generator NRG Energy announced plans to raise up to $4 billion by selling about 6,000 MW of assets.
Merchant generators, particularly stand-alone IPPs such as Dynegy and NRG, are under increasing pressure as a result of a business model that requires high capital investment but is exposed to commodity risks. Some analysts say IPPs are headed toward a second round of bankruptcies.
For the two recently announced Dynegy asset sales, Barclays served as lead financial advisor and Deutsche Bank served as advisor on the Dighton and Milford transactions. The transactions are subject to customary regulatory approvals.
