Dynegy Inc. (DYN) is based in Houston. Last month, it announced two mega deals worth $6.25 billion. The deals are with Duke Energy (DUK) and Energy Capital Partners (or ECP). ECP is a private equity firm based in New Jersey.
The deal with Duke Energy involves Duke’s non-regulated Midwest commercial generation business. Dynegy will be paying up $2.8 billion in cash for the business. This includes ownership interests in 11 power plants. It also includes the competitive retail sales division in Ohio. The Midwest commercial generation business has been for sale since February. Duke wants to focus more on its regulated utilities business.
Dynegy will also buy some power generating assets from EquiPower Resources—owned by ECP—for $3.45 billion. As part of the deal, Dynegy will pay ECP $2.2 billion in cash and $1.2 billion in stock. The plants are located in New England, Pennsylvania, and the Midwest. They will help Dynegy add capacity in the less regulated eastern market.
What this means for Dynegy
The deals should be closed by the end of 1Q15. After the deal, Dynegy will own a total generation capacity of 26,000 megawatts (or MW). It will become the third largest independent power producer in the U.S. The top independent power producers are NRG Energy (NRG) and Exelon Corporation (EXC).
Dynegy isn’t part of the Utilities Select Sector SPDR (XLU). This is a key exchange-traded fund (or ETF) that tracks the sector. In this series, we’ll evaluate the Dynegy deal in more detail.