Blackstone and Arclight buy four power stations for $2.2bn

The two buyout firms have purchased three natural gas plants and a coal-fired facility at a time when US power prices are low, anticipating future increases.

Blackstone Group and Arclight Capital have teamed up to buy four Midwestern US power stations from independent power producer American Electric Power for $2.17 billion.

The deal, still subject to regulatory approval, will see the two private equity firms acquire three natural gas plants and a coal-fired facility in Indiana and Ohio at a time when wholesale power prices across the US are historically low. The move suggests New York-based Blackstone and Boston-based Arclight anticipate prices will rebound in the future.

The lower power prices have hurt independent power producers like AEP, headquartered in Columbus, Ohio, which sells electricity to other utilities instead of delivering it directly to customers of regulated utilities. AEP announced in January 2015 it was considering the four plants in a bid to focus on the regulated utilities it owns.

The power producer said it expects to net around $1.2 billion after taxes with this deal, and will explain how it plans to reinvest the proceeds at an analyst day on 1 November.

“AEP’s long-term strategy has been to become a fully regulated, premium energy company focused on investment in infrastructure and the energy innovations that our customers want and need,” AEP chief executive Nicholas Akins said in a statement.

AEP owns and operates more than 60 power plants across the US, 60 percent of which are fuelled by coal, 23 percent by natural gas, 5 percent by nuclear and the rest by wind and hydro.

In February 2015, Blackstone closed its Blackstone Energy Partners II fund on $4.5 billion. Arclight, a firm focused on the energy sector, reported raising $5.27 billion as of last April for its sixth flagship fund, Arclight Energy Partners Fund VI.

This April, Electric transmission company Gridliance, which is backed by Blackstone, announced it had hired Calvin Crowder from AEP. Crowder spent 16 years at AEP and was most recently its executive director for electric transmission in Texas.