TransCanada eyes sale of U.S. generation fleet to finance gas company takeover
- TransCanada is partnering with JP Morgan to search for buyers for more than $7 billion in assets to help finance its takeover of Columbia Pipeline Group, Bloomberg reports.
- Among the assets for sale are a portfolio of merchant generators in the Northeast U.S. and a minority stake in TransCanada’s Mexican natural gas pipeline business, totaling about $7.1 billion in value, according to Moody's.
- These power plants could attract interest from private equity investors, Bloomberg noted, including Blackstone Group LP, D.E. Shaw & Co., Macquarie Group Ltd. and Riverstone Holdings LLC. Other energy companies taking a look could include NRG Energy and Calpine Corp.
While the trend of late has been Canadian power players looking to snap up U.S. power assets, Calgary-based TransCanada is looking to offload its plants in the Northeast to help it get deeper into the gas pipeline business.
The company, known for its failed bid to build the Keystone XL oil pipeline through the U.S., is currently undertaking the largest deal in its history with $10.2 billion purchase of Columbia Pipeline Group, aimed at extending its reach into the U.S. natural gas market.
Selling its U.S. power portfolio is likely the best path for TransCanada to obtain the necessary funds needed to purchase Columbia Pipeline, Grady Semmens, a spokesman from the company told Bloomberg this week.
“This is a high-quality business that has served our shareholders well for many years,” Semmens said. Even so, the company may have trouble fetching similar sale prices for some of the power assets in its portfolio, according to Travis Miller, an analyst at Morningstar Inc. in Chicago.
As for potential investors, Bloomberg lists NRG and Calpine along a selection of private equity groups, who analysts said may be drawn to the generation fleet due to their appetite for risk and access to low-cost capital.
The assets for sale in the U.S. include gas and oil-fired plants in Pennsylvania, New York and Rhode Island, hydroelectric plants in New England, and a wind farm in Maine.
Finding investors with a healthy risk appetite and money to spend could be critical for any company selling merchant power plants in today's market. U.S. independent generators took a beating in the stock market last year as low natural gas prices and compliance with environmental regulations ate into company revenues.
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