Dynegy To Acquire Duke Energy, Energy Capital Assets For $6.25 Bln

(RTTNews) - Power producer Dynegy Inc. (DYN) Friday said it has signed two separate definitive agreements to acquire the ownership interests in certain Midwest generation assets from Duke Energy Corp. (DUK), as well as EquiPower Resources Corp and Brayton Point Holdings, LLC from Energy Capital Partners or ECP. Dynegy's stock gained 11 percent in pre-market activity.

The purchase price is $2.8 billion cash for Duke assets and $3.45 billion for ECP assets. Dynegy will issue $200 million of its common stock to ECP as part of the transaction consideration at closing. Both transactions are expected to close by the end of the first quarter of 2015.

The deals are expected to almost double Dynegy's existing portfolio to nearly 26,000 megawatts.

As a result of the transaction, Dynegy sees cost reductions of over $40 million per year, $200 million in collateral efficiencies and nearly $500 million in present value cash tax savings.

The ECP assets are generating facilities, including, Milford, Lake Road, Dighton, Masspower, Liberty, Elwood, Richland, Stryker, Kincaid and Brayton Point.

The Duke assets include ownership interests in 11 power plants and Duke Energy Retail Sales.

The Midwest generation business includes 11 merchant power plants with a capacity of approximately 6,100 megawatts. The plants are dispatched into the PJM Interconnection LLC, the largest U.S. wholesale power market, and have significant environmental controls.

The plants are fully owned or partially-owned by Duke Energy Ohio and reported in the company's Commercial Power business unit.

Nine of the power plants are located in Ohio, one is in Illinois and one in Pennsylvania.

Dynegy President and CEO Robert Flexon said, "The two acquisitions announced today are both exceptionally high quality portfolios that have been well managed and run by Duke and ECP employees. The addition of these portfolios transforms Dynegy by adding considerable scale in the PJM and New England markets."

Upon closing of these transactions, Dynegy will own nearly 26,000 megawatts of generating capacity nationally and provide retail electricity to residents and businesses in Illinois, Ohio, Pennsylvania and Michigan.

The addition of these portfolios is estimated to significantly improve Dynegy's financial outlook by tripling its 2015 Adjusted Adjusted Earnings Before Interest, Tax, Depreciation and Amortization or EBITDA.

It is expected to be massively accretive to EBITDA and Free Cash Flow per share in 2015 and beyond.

The company sees 2015 Pro Forma consolidated adjusted EBITDA of $1.2 billion to $1.4 billion and free cash flow of $480 million to $680 million, assuming both transactions close on December 31.

Dynegy said its $3.2 billion net operating loss position would be available to offset taxable income of the combined company, providing nearly $500 million in present value cash tax savings.

Meanwhile, Duke said separately that Dayton Power & Light and American Electric Power's ownership interest in some of the power plants is not included in this transaction. The Duke Energy Ohio and Kentucky and Duke Energy Indiana regulated utilities are not a part of the deal.

Due to the sale, in the third quarter, Duke Energy will recognize about $500 million pre-tax reversal of the $1.4 billion impairment previously recognized in 2014.

The transaction is expected to be accretive to shareholders by 2016, and the use of the proceeds is being evaluated.

DYN closed up 0.3 percent on Thursday at $29.72, ad is up 11 percent in pre-market trading.

DUK settled up 0.4 percent at $73.04, and advanced around 1 percent in pre-market trading.