FirstEnergy Corp. announced Jan. 19 that it reached an agreement to sell four competitive natural gas plants in Pennsylvania and its ownership in a Virginia hydroelectric plant to a subsidiary of LS Power Group affilate LS Power Equity Partners III LP.
LS Power will purchase the facilities for approximately $925 million in the all-cash transaction, according to the terms of the agreement. The power plants are owned directly or indirectly by FirstEnergy competitive subsidiaries Allegheny Energy Supply Co. and Allegheny Generating Co., with a total capacity of 1,572 MW.
The sale involves the 88-MW Allegheny Energy units 1 and 2 and 550-MW Allegheny Energy 3, 4 and 5 units, jointly referred to as the Springdale plant; 88-MW Allegheny Energy units 12 & 13, or Chambersburg facility; 88-MW Allegheny Energy units 8 and 9, or Gans plant; the 45-MW AE Hunlock 4 plant; and AE Supply's 713-MW ownership interest in the Bath County hydroelectric plant.
FirstEnergy, in a Form 8-K filed in early December 2016, revealed that AE Supply entered into exclusive discussions involving the sale of its gas and hydroelectric assets, which have a combined net book value of about $1.2 billion.
FirstEnergy management indicated on the company's third-quarter earnings call in November 2016 that the competitive business is under strategic review and could be forced to file for bankruptcy. FirstEnergy also is "open to exploring the sale of any or all of these assets," the company's top executive said, specifically identifying gas and hydro generation at Allegheny Energy Supply.
"The sale of these plants is consistent with FirstEnergy's strategy of operating as a fully regulated utility company," the company said in its Jan. 19 news release. Upon completion of the sale, FirstEnergy said it will own or control a total generating capacity of about 15,380 MW in Ohio, Pennsylvania, West Virginia, New Jersey, Virginia and Illinois.
The transaction is expected to close in the third quarter and is subject to customary and other closing conditions, including approval by FERC and other agencies, as well as third-party consents.