Dynegy cuts exposure to wholesale power with deals worth $6.25 billion

Fri Aug 22, 2014 1:09pm EDT
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By Anannya Pramanick

(Reuters) - Power company Dynegy Inc (DYN.N: Quote) said on Friday that it would buy coal and gas power plants for $6.25 billion to increase its presence in two less regulated eastern U.S. markets, sending its shares up as much as 22.5 percent.

The deals for select assets of Duke Energy Corp (DUK.N: Quote) and Energy Capital Partners will nearly double Dynegy's national generating capacity and allow the company to retail electricity in Illinois, Ohio, Pennsylvania and Michigan, increasing its exposure to the PJM and New England markets.

The acquisitions are the latest in a series of deals aimed at minimizing exposure to the volatile wholesale power market, and analysts expect consolidation to continue.

Earlier this year, Wisconsin Energy Corp (WEC.N: Quote) said it would buy Integrys Energy Group Inc TEG.N for $5.71 billion about two months after Exelon Corp (EXC.N: Quote) agreed to buy Pepco Holdings Inc POM.N for $6.83 billion to cut exposure to the wholesale power market.

"The structure of the PJM (Pennsylvania, New Jersey, Maryland) marketplace is more transparent and probably, in the long term, more beneficial to (power) generators," ISI Group analyst Jon Cohen said.

Dynegy emerged from bankruptcy in 2012, less than a year after its unit filed for protection from creditors, burdened by costly power plant leases. (reut.rs/1oYwc5q)

The company said it intends to issue about $5 billion in new unsecured bonds and $1.25 billion in equity and equity-linked securities to fund the deals.

At the end of June, Dynegy had long-term debt of about $1.97 billion.   Continued...

High voltage power lines cross through the California desert west of El Centro, June 9, 2003. REUTERS/Fred Greaves