The Federal Energy Regulatory Commission on Wednesday approved Pacific Gas & Electric’s proposal to transfer 5.6 GW of non-nuclear generating assets to a new subsidiary in preparation for selling a 49.9% stake in it to another company.
Although state approval of the asset transfer is pending, PG&E expects to launch a sale process this month, according to Carolyn Burke, PG&E Corp. CFO.
“We've actually seen pretty robust inbound interest in the asset and so we do expect a fairly competitive process,” Burke said May 4 during an earnings conference call.
In its decision, FERC dismissed arguments that the potential sale to a third party should be analyzed as part of the proposal to spin off the generating assets into Pacific Generation.
“The appropriate time to address the minority interest sale is when an application is submitted seeking authorization for that transaction,” FERC said.
FERC also rejected concerns about a possible sale to private equity.
“We find that Public Citizen’s argument that transferring control of consumer-funded assets to private equity will impede effective state regulatory oversight is beyond the scope of this proceeding because the proposed transaction only involves an internal transfer of generation assets from PG&E to Pacific Generation, a wholly owned subsidiary of PG&E,” FERC said.
Under the planned transaction, PG&E will transfer to Pacific Generation about 3,848 MW of hydroelectric capacity, 1,400 MW of gas-fired generation, 152 MW of solar generation and 182 MW of battery energy storage.
PG&E plans to sell a minority stake in Pacific Generation to one or more third-party investors so the utility can access equity capital more efficiently than through the sale of additional PG&E Corp. stock, FERC said.
PG&E’s non-nuclear generating portfolio is unique because it provides potential investors with cost-of-service, regulated clean generation in California without the direct risk of wildfires, according to Burke.
The assets seem most interesting to long-term infrastructure investors, but PG&E has seen a wide range of interest in them, she said.
PG&E expects the California Public Utilities Commission will issue a proposed decision on the utility’s spin-off plan early next year, Patricia Poppe, PG&E Corp. CEO, said.
The utility expects to close on a deal in the first half of 2024, according to Burke.
