Talen buys $1.2bn gas portfolio, sells renewables

The Riverstone-backed power producer has completed both the purchase three natural-gas fired power plants and the divestment of its renewables business.

Talen Energy, a spin-off of US utility PPL Corporation backed by private equity firm Riverstone Holdings , has added more than 2,500 megawatts (MW) of generating capacity to its portfolio by acquiring MACH Gen, the owner and operator of natural gas-fired power plants in the US.

The acquisition of the three facilities, located in New York, Massachusetts and Arizona, will be financed with a combination of debt and cash. It coincides with the divestment of Talen Energy's renewables business, which the company announced in July .

The Pennsylvania-based power company has now completed the sale of Talen Renewable Energy, a portfolio that comprises 25 projects in the landfill gas-to-energy, solar, wind and cogeneration sectors and has a combined generating capacity of 65MW, to Energy Power Partners , a California-based private equity firm focused on renewables and clean energy.

“With the closing of these transactions, Talen Energy owns or controls about 17,600MW of generating capacity,” the company said in a statement. “The total does not reflect announced divestitures of about 1,400MW that are expected to close in the first quarter of 2016.”

In early October , Talen said it would be selling two hydroelectric power plants – Holtwood and Wallenpaupack – to Brookfield Renewable Energy Partners, the renewable power platform of Brookfield Asset Management , for $860 million. It is also offloading Ironwood, a 778MW natural gas-fired combined cycle power plant in Lebanon, Pennsylvania to TransCanada, for $654 million. Two weeks ago, Talen also announced the sale of CP Crane, a 399MW coal-fired plant in Baltimore, Maryland to alternative investment firm Avenue Capital Group.

Talen did not disclose the sale price for the Maryland plant, stating only that “Proceeds of the sale are not material, and the effects of divesting the Crane plant on net income, adjusted EBITDA, cash from operations and adjusted free cash flow on a full-year 2016 basis are not expected to be material.” A spokesperson for the company declined to comment beyond this statement.

The four asset sales announced to date, which have a combined generating capacity of 1,395MW, are part of a December 2014 Federal Energy Regulatory Commission (FERC) order requiring Talen to divest approximately 10 assets in the PJM (Mid-Atlantic states) market. The order was a prerequisite for PPL and Riverstone Holdings to create Talen Energy.

The sale of its renewables business is not related to the FERC order but is part of Talen Energy's strategy to focus on utility-scale renewables projects as opposed to the smaller, residential, on-site projects that have made up its renewables portfolio until now. Financial details have not been disclosed.

Officially launched on June 1, 2015 by spinning off PPL Corporation's power generating business and combining it with Riverstone, Talen Energy began trading on the New York Stock Exchange on June 2.

New York-based Riverstone was established in 2000, having raised $29 billion of equity capital since inception. It has committed approximately that amount to over 110 investments in North America, Latin America, Europe, Africa and Asia.