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Macquarie to sell 642-MW NJ gas plant in debt reduction move

Global infrastructure investor Macquarie Infrastructure Corp., or MIC, has agreed to sell the 642-MW, gas-fired Bayonne Energy Center in northern New Jersey for about $900 million to help reduce debt and improve its balance sheet.

Its subsidiary, MIC Thermal Power Holdings LLC agreed to sell the asset on July 27, and the transaction was announced in a news release July 29. According to MIC's Form 8-K, the subsidiary sold its 100% equity interest in the plant to North Haven Infrastructure Partners II Bayonne Holdings LLC, an investment fund managed by Morgan Stanley-owned Morgan Stanley Infrastructure Partners.

"Having completed various capacity and capability expansion projects at BEC, we concluded that this was an appropriate time to sell the facility and redeploy the proceeds to address strategic priorities including strengthening our balance sheet," MIC CEO Christopher Frost said in the news release.

The Bayonne Energy Center consists of 10 gas turbines. Eight units, totaling 512 MW, came online in 2012. Another two units, totaling 130 MW, came online in May, according to S&P Global Market Intelligence data. The plant interconnects into the New York ISO market, specifically, the ISO's Zone J, via a cable running under New York Harbor. MIC acquired the plant in 2015.

MIC, majority owned by Australia-headquartered infrastructure investor Macquarie Group Ltd., expects the buyer to fund the deal with about $656.5 million in cash and the assumption of about $243.5 million in debt, according to the Form 8-K. The transaction values the Bayonne plant at about $1,400/kW of generating capacity, MIC said.

Part of the proceeds, after netting out transaction fees and expenses, will go toward reducing loans including $150 million in outstanding debt at MIC's liquids storage and terminal business, International Matex Tank Terminals, or IMTT. The Bayonne plant is located on land owned by IMTT.

Wells Fargo Securities analysts said the sale "does not come as a surprise," given MIC has faced challenges from limited access to reasonably priced capital and its IMTT business faced setbacks after multiple capacity contracts not getting renewed. Though there could be potential upside to MIC's stock price if the sale goes through, the Wells Fargo analysts expect little share price response until investors understand whether growth can resume at the IMTT segment.

Guggenheim Securities advised on the sale, which MIC expects to complete in the fourth quarter of 2018 pending certain closing conditions. The sale will need approval by the U.S. Federal Energy Regulatory Commission and the New York Public Service Commission, MIC' said in the Form 8-K.

MIC reports second-quarter 2018 results on Aug. 2.