Dive Brief:
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FirstEnergy has signed an agreement to sell four gas-fired power plants in Pennsylvania and its competitive portion of a Virginia hydroelectric station to a subsidiary of LS Power Equity Partners III LP.
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The $925 million cash deal includes a total of 1,572 MW of capacity and is expected to close in the third quarter of 2017.
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The deal still requires approval by the Federal Energy Regulatory Commission and other agencies, as well as third-party consents.
Dive Insight:
FirstEnergy, like other Ohio utilities, is struggling in the PJM competitive electricity market. FE and American Electric Power have both resisted deregulation in the state, as competitive markets have put economic pressure on some of the generation assets.
FirstEnergy in November said it could sell up to 13 power plants as it shifts back toward a focus on its regulated assets. The utility, along with AEP, attempted to win income supports from regulators for a group of aging coal and nuclear plants, but were forced to change approach after FERC blocked the subsidies.
The recently signed deal with LS Power calls for the sale of three plants, as well as FE’s share in a fourth.
The plants are Bath County Hydro, a 713-MW pumped-storage hydro plant in Warm Springs, Va.; five units totaling 638 MW of the Springdale facility in Springdale Township, Pa.; two units totaling 88 MW at the Chambersburg plant in Guildford Township, Pa.; two units totaling 88 MW at the Gans station in Springhill Township, Pa., and the 45 MW Hunlock Creek plant in Hunlock Creek, Pa.
All the facilities are owned directly or indirectly by FE subsidiaries Allegheny Energy Supply Co. and Allegheny Generating Co.
FirstEnergy said the sale is consistent with its strategy of operating as a fully regulated utility company. After the sale closes, FirstEnergy will own or control about 15,380 MW of nuclear, coal, hydro, wind and solar facilities across Ohio, Pennsylvania, West Virginia, New Jersey, Virginia and Illinois.
In addition to selling the plants, FirstEnergy received a "distribution modernization rider" from regulators last year — a payment to ensure the utility “will be healthy enough to make … modernization investments when called upon," according to the regulatory order. The rider is one of a growing number of "around market mechanisms" states are devising to compensate for at-risk baseload generation in organized markets.
