Independent power producer Talen Energy CorporationTLN announced that it would sell three of its Pennsylvania power plants for gross proceeds of $1.51 billion, subject to customary purchase price adjustments. Combined production capacity of the assets earmarked for sale is nearly 996 megawatts (MW).
Pennsylvania-based Talen Energy was formed from the spin-off of the competitive energy business of PPL Corporation PPL . Talen Energy owns and operates nearly 14,000 MW of power generating capacity. Talen Energy has diversified fuel-fired generation assets, including coal, natural gas and nuclear.
The sale of the power plants is in response to a Dec 2014 Federal Energy Regulatory Commission order that required the divestment of certain assets as part of the approval leading to the formation of Talen Energy. The order required divestment of certain assets in specific regions of the Pennsylvania-New Jersey-Maryland (PJM) Interconnection, which include portions of eastern Pennsylvania, New Jersey and Maryland.
The power plants - Ironwood, Holtwood and Wallenpaupack - earmarked for sale would have contributed to Talen Energy's net income and cash from operations on a full-year 2016 basis of nearly $56 million and $101 million, respectively.
The 704 MW Ironwood combined-cycle, natural gas-fired plant is being sold to a subsidiary of TransCanada Corporation TRP for a total purchase price of $654 million, subject to customary purchase price adjustments. In connection with the transaction, Talen Energy expects to repay nearly $42 million of indebtedness, plus a customary pre-payment premium, associated with the facility.
In a separate deal, the Holtwood and Lake Wallenpaupack hydroelectric projects, with a combined generating capacity of 292 MW, are being sold to a subsidiary of Brookfield Renewable Energy Partners L.P. BEP for $860 million, subject to customary purchase price adjustments.
The above transactions are expected to close in the first quarter of next year and result in net proceeds of approximately $1.16 billion. Talen Energy plans to utilize the proceeds to lower its existing debt burden.
Even with the sale of three assets to meet regulatory requirements, Talen Energy is still advantageously placed to capitalize on its locational advantage, as 83% of its generating assets are located in the PJM region, where demand for wholesale electricity is high.
Talen Energy Corporation currently has a Zacks Rank #1(Strong Buy).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
