Riverstone, PPL launch new energy company

Pennsylvania-based utility group PPL will spin off segments of its business and combine them with Riverstone’s generation portfolio to form Talen Energy, which will own and operate more than 15,000 megawatts (MW) of generating capacity, making it the third-largest investor-owned independent power producer (IPP) in the US.

PPL Corporation will spin off the parent company of PPL Generation – PPL Energy Supply – as well as PPL EnergyPlus to PPL share owners and then immediately combine them with Riverstone’s generation business to form the new company which is expected to be listed on the New York Stock Exchange, according to a statement issued by PPL.

Talen Energy, which will be based in a yet-to-be-determined location in Pennsylvania, will have “excellent fuel diversity” according to the statement, with 40 percent natural gas, 40 percent coal and 15 percent nuclear.

PPL also has 11 hydroelectric units in Montana but those are expected to be sold to NorthWestern Energy pursuant to a September 2013 definitive agreement.

About 83 percent of Talen Energy’s generating capacity will be located in the region served by the Pennsylvania – New Jersey – Maryland Interconnection, the world’s largest wholesale electricity market. The new company will also operate in key markets such as Texas, Massachusetts and Montana.

Paul Farr, currently PPL’s executive vice president and chief financial officer, will head Talen Energy as the company’s president and chief executive upon closing of the transaction.

Also upon closing, PPL Corporation’s shareholders will own 65 percent of Talen Energy and Riverstone will own 35 percent. PPL Corporation, however, will not have an ownership interest in Talen Energy.

“Given the challenges, uncertainties and opportunities in the wholesale power markets, maintaining the status quo was not a viable option,” said PPL chairman, president and chief executive William Spence, explaining the company’s decision to divest PPL Energy Supply and PPL EnergyPlus.

“This transaction provides greater clarity for shareowners, our PPL Energy Supply employees, customers and the communities we serve,” he added.

The transaction, which does not require shareholder approval, is expected to close in the next nine to 12 months. It is, however, subject to approval by the Nuclear Regulatory Commission, the Federal Energy Regulatory Commission, the Pennsylvania Public Utility Commission and other customary closing conditions.

Founded in New York in 2000, Riverstone has raised $27 billion and has committed approximately $26.1 billion to 108 investments in North America, Latin America, Europe, Africa and Asia.

The firm conducts buyout and growth capital investments in the exploration and production, midstream, oilfield services, power and renewable sectors.