GenOn Selling More Assets in Restructuring
GenOn Energy, a unit of NRG Energy that filed for bankruptcy in June 2017, said it has agreed to sell two units of the Canal Generating Plant to Stonepeak Kestrel, a subsidiary of Stonepeak Infrastructure Partners, a private equity firm with offices in New York City and Houston, Texas.
The Canal plant in Sandwich, Massachusetts, named after the Cape Cod Canal, was a coal-fired facility when it came online in 1968. Today it operates on natural gas and petroleum fuel. The $390.3 million deal announced March 23 is expected to close in the third quarter of this year. The two units have combined generating capacity of 1,112 MW.
GenOn, formed in 2010 after the merger of RRI Energy and Mirant, was bought by NRG in 2012 in a $1.7 billion deal. The company as part of its reorganization has been divesting assets, and in February agreed to sell its 810-MW gas-fired combined cycle Hunterstown plant in Gettysburg, Pennsylvania, to Platinum Equity, a private equity firm in Beverly Hills, California, for $520 million. Platinum Equity in a release said it wanted to acquire add-on opportunities for the plant.
“The power-generation industry continues to experience some dislocation, which is fueling corporate carve-out activity,” Louis Samson, a Platinum Equity partner, said in a news release. “Hunterstown is well maintained and features industry-leading technology. It operates in PJM, the largest electricity market in the United States, and generates strong recurring revenue streams.”
GenOn also is retiring assets. The company in late February told the California Public Utilities Commission and California Independent System Operator that it will close three gas-fired plants near Los Angeles: Etiwanda Generating Station Units 3 and 4 on June 1, 2018; Ormond Beach Generating Station Units 1 and 2 on October 1, 2018; and Ellwood Generating Station on January 1, 2019.
GenOn in a statement announcing the Canal and Hunterstown deals said it “estimates the realization of $910.3 million of gross cash proceeds, $886 million of which is expected by early in the third quarter of 2018, with an additional $24.3 million of post-closing excess fuel inventory payments within the next two years.” The company also said it “continues to make significant additional progress in exploring and evaluating value-maximizing alternatives for its various remaining interests.”
However, GenOn said it will not seek any more bids for the 1.14-GW Bowline power plant in Haverstraw, New York, and it expects to retain ownership. The company said the facility is undervalued, with the highest bid received for the plant at $240 million. The company in its statement said it plans to “undertake operational and capital structure initiatives to maximize [the plant’s] profitability and cash flow.”
Reports at the time of GenOn’s bankruptcy filing said the company’s restructuring plan would eliminate $1.83 billion in GenOn Energy debt, along with $695 million from GenOn Americas Generation. Filings also showed the plan involves NRG ceding all equity in the restructured GenOn to the subsidiary’s creditors. At the time of the filing, GenOn had a total of 15,394 MW, just more than one-third of NRG’s power generation capacity.
NRG on March 1 reported its full-year 2017 net loss was almost $1.55 billion, or $6.79 per diluted common share. The company said the loss includes a $1.8 billion impairment of fixed assets, goodwill, and investments, with $1.2 billion of that related to the South Texas Project nuclear generation facility, primarily due to the revised outlook of future commodity prices.
Mauricio Gutierrez, NRG’s president and CEO, in a March 1 news release said, “Our business continued its strong performance in a year when we announced our Transformation Plan aimed at simplifying and enhancing the business to deliver increased shareholder value. With this announcement, we are demonstrating measurable success towards achieving the goals of cost excellence, portfolio optimization and capital structure enhancements. I’m also proud to report that we did this while realizing our second-best safety year in company history.”
—Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).