Dynegy gets federal nod in multibillion-dollar Duke deal to boost generation

By Edward Klump | 03/31/2015 08:18 AM EDT

After some delay, Dynegy Inc. plans this week to close the multibillion-dollar purchases it announced last August to bolster power generation capacity and add to its retail offerings.

Houston-based Dynegy announced the planned closings in a news release dated Friday after it received authorization for the acquisitions from the Federal Energy Regulatory Commission.

The moves will increase Dynegy’s holdings in the U.S. Midwest and Northeast. They include adding interests in generation assets and a retail business from Duke Energy Corp., along with the purchases of EquiPower Resources Corp. and Brayton Point Holdings assets from Energy Capital Partners.


"With this authorization, the EquiPower and Brayton Point Holdings transactions are expected to close on Wednesday, April 1 and the Duke transaction is anticipated to close on Thursday, April 2," Dynegy said in its release.

Dynegy announced the proposed deals last year, valuing them at more than $6 billion, to nearly double its generation capacity to almost 26,000 megawatts. The company was set to be focused on more plants fueled by natural gas and coal.

Then, in January, Dynegy said it didn’t expect the transactions to close by the end of the first quarter of this year as federal regulators sought more information. In February, Dynegy said it had asked for the purchases to be approved by FERC by April 1 after supplying more information. The company also noted a settlement agreement with the PJM Independent Market Monitor.

In its orders, FERC said it had looked at potential effects on markets, rates, regulation and cross-subsidization. It didn’t find inappropriate effects. FERC had separate orders for the Duke assets and other holdings.

In the filing on the Duke deal, for example, FERC said it agreed with the applicants that the proposal "will not have an adverse effect on rates." In the other filing, FERC said the plan "will not have an adverse effect on competition" in the ISO New England and PJM markets, even as the commission noted certain flaws that it fixed in a delivered price test for New England.

The FERC authorizations appeared to go over well with investors, who may have been digesting the news. Shares of Dynegy surged 9.2 percent yesterday to end regular trading at $30.88.

Earlier this year, Dynegy said that, in light of the delay in closing purchases and lower commodity prices, it had reduced its range for a 2015 outlook for adjusted earnings before interest, taxes, depreciation and amortization.

Duke, in a statement last week, noted that the Department of Justice and the Federal Trade Commission had previously granted early termination of the Hart-Scott-Rodino Act waiting period related to its proposed transaction.

Duke said its sale involves certain power plants in Ohio, Illinois and Pennsylvania. It also includes Duke Energy Retail Sales, which is a competitive retail operation in Ohio.

Dynegy also plans to acquire assets through its transactions in states such as Connecticut and Massachusetts, according to a previous slide presentation.

Besides having nearly 26,000 MW of generation once the deals close, Dynegy said it will offer power to individuals, businesses and municipalities in Illinois, Ohio and Pennsylvania using the Homefield Energy and Dynegy Energy Services retail brands.