GenOn Energy Inc. has agreed to sell an 810-MW combined-cycle, gas-fired plant in Pennsylvania to private equity firm Platinum Equity Advisors LLC in a deal valued at over $500 million.
GenOn, through its NRG Wholesale Generation LP and RRI Energy Services LLC subsidiaries, entered into an asset purchase agreement with Platinum Equity on Feb. 27 for the Hunterstown combined-cycle natural gas plant in Gettysburg, Pa. The plant is located in PJM Interconnection's Metropolitan Edison Co. zone. Under terms of the deal, Platinum will pay GenOn $498 million for the asset, with the expected closing price rising to $520 million after adjusting for working capital, according to a filing. Advisory firm AOS Energy Partners, which served as a deal consultant to Platinum, will act as a co-investor with Platinum on the deal.
GenOn said it will assign certain third-party gas interconnection contracts to Platinum, according to the filing, while NRG Energy Inc. will continue to provide "certain administrative, tax, accounting, information technology and other operational services with respect to operating the Hunterstown Facility on a transitional basis following the closing of the transactions contemplated by the Purchase Agreement."
GenOn, which gained approval for its Chapter 11 bankruptcy reorganization plan in 2017, must gain approval to modify its restructuring plan in light of the sale in federal court. The company said it expects to gain approval, as more than 50% of outstanding bondholders have signaled their support of the Hunterstown transaction, according to the filing.
The deal is expected to close in the second quarter of 2018, according to the filing, pending approvals by the Federal Energy Regulatory Commission, Federal Trade Commission and the Pennsylvania Department of Environmental Protection.
Platinum currently oversees $13 billion in assets under management and is drawing from its $6.5 billion global buyout fund under Platinum Equity Capital Partners IV LP.
"The power generation industry continues to experience some dislocation, which is fueling corporate carve out activity," Platinum Equity Partner Louis Samson said in a Feb. 27 statement. "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."
"We believe that the dynamics prevailing in this sector will continue to create attractive opportunities for us to acquire assets and create value," Samson added.
Credit Suisse Securities (USA) LLC acted as financial advisor to GenOn on the sale. Latham & Watkins are acting as legal counsel to Platinum Equity, with Morgan Stanley leading acquisition financing.
