PFR's Deal of the Year Awards are back, recognizing excellence in power project finance and M&A. Check out the shortlisted deals in the North American conventional power mergers & acquisitions category.

Congratulations to everyone who worked on the shortlisted deals:

  • Rockland Capital’s acquisition of the Kimura Power portfolio from Dayton Power and Light.
  • Middle River Power’s acquisition of a thermal portfolio in California from AltaGas
  • Stonepeak Infrastructure Partners’ acquisition of Canal units 1, 2 and 3 from GenOn Energy and NRG Energy
  • Axium Infrastructure and Engie North America’s acquisition of Boston’s Medical Area Total Energy Plant from Morgan Stanley Infrastructure Partners and Veolia via BDC.

Deal profiles:

Kimura Power

Buyer(s)

Rockland Capital

Assets

An approximately 1 GW six-project portfolio of peakers in Ohio and Indiana.

Seller(s)

Dayton Power and Light (AES Corp.)

Deal Value

$241 million

Closing Date

March 27

Financial Adviser (s)

Bank of America Merrill Lynch (seller)

Legal Adviser(s)

Bracewell (buyer)

Other Involved Parties

ABN Amro, BNP Paribas, CIT Bank, Crédit Agricole, Investec (acquisition finance bookrunners)

Notes:

AES Corp. subsidiary Dayton Power & Light’s plan to transform itself into a pure-play transmission and distribution company meant that generation assets would have to be either shuttered or sold. Sales were unlikely for some of its aging coal-fired plants, but a portfolio of gas-fired and oil-fueled peakers, the jewels in the crown, merited a full-scale auction. DP&L hired Bank of America Merrill Lynch in 2017 to run the process and Rockland Capital signed a sale purchase deal in December. The private equity firm financed the deal with a $170 million term loan A and $20 million revolver underwritten by five banks.
“The Kimura Portfolio compliments Rockland’s other recent acquisitions, creating scale and diversification across several PJM load zones” said Scott Harlan, managing partner of Rockland Capital, in a statement.  “We believe we are well-suited to realize substantial operating efficiencies across the Portfolio and to capitalize on an attractive entry price for dual-fuel peaking assets that are fully compliant with the needs of PJM’s Capacity Performance regime.”
The assets are arranged under a group of holding companies named for Japanese American martial artist Taky Kimura, a close friend of Bruce Lee.


MRP III

Buyer(s)

Middle River Power (Avenue Capital Group)

Assets

A 330 MW combined-cycle plant and two peakers totaling 193 MW in California.

Seller(s)

AltaGas

Deal Value

$300 million

Closing Date

Nov. 13

Financial Adviser(s)

Scotiabank (Seller)

Legal Adviser(s)

Other Involved Parties

MUFG (acquisition finance bookrunner)

Notes:

When AltaGas agreed to acquire utility holding company WGL Holdings for C$8.4 billion in January 2017, the buyer expected to find some C$2 billion of the purchase price by selling assets, but was open-minded about what exactly it would sell. That flexibility seems to have paid off when the company came to market a portion of its California portfolio. Having initially explored the sale of two contracted combined-cycle projects in the state, Blythe and Tracy, the company went back to the drawing board in the first quarter of 2018 before returning to the market, this time with Tracy alongside two smaller peakers. Following an auction run by Scotiabank, Avenue Capital Group portfolio company Middle River Power came up trumps, financing its $300 million acquisition with $246.5 million of debt arranged by MUFG, which was said to be 1.5 times oversubscribed.


Canal 1, 2 & 3

Buyer(s)

Stonepeak Infrastructure Partners

Assets

Two dual-fuel peaking units totaling 1,112 MW and a 333 MW construction-stage simple-cycle peaker in Massachusetts.

Seller(s)

GenOn Energy

Deal Value

$325 million (Canal 1 and 2) and $167 million (Canal 3)

Closing Date

Financial Adviser(s)

Credit Suisse (seller)

Legal Adviser(s)

Kirkland & Ellis (seller)
Sidley Austin (buyer)
Davis Polk & Wardwell (GenOn senior noteholders)
Quinn Emanuel (GenOn Americas Generation noteholders)

Other Involved Parties

Natixis (bookrunner on debt for Canal 3),
MUFG, Investec (bookrunners on debt for Canals 1 & 2)

Notes:

One of the most anticipated power sector restructurings of recent years, that of GenOn Energy, was always likely to bring with it a flurry of opportunities for acquisitive companies both strategic and financial. For Stonepeak Infrastructure Partners, it didn’t disappoint. The fund manager swooped, via portfolio companies dubbed Kestrel, on Canal units 1, 2 and 3. Interestingly, only units 1 and 2 were already owned by GenOn. The NRG Energy subsidiary had pre-paid for an option to acquire unit 3 from another company in the same group, but had not yet gone through with the acquisition. Given the very different nature of the vintage units and the unbuilt one, the acquisitions were carried out through separate special purpose vehicles and with different financing arrangements. MUFG and Investec arranged the $285 million seven-year loan for the older units 1 and 2, while Natixis led on the $200 million mini-perm for unit 3, which closed while the project was still owned by NRG. The asset sales helped GenOn emerge from bankruptcy before the end of 2018.


Medical Area Total Energy Plant (MATEP)

Buyer(s)

Axium Infrastructure, ENGIE North America

Assets

A 101 MW microgrid, district energy and chilled water system at the Longwood Medical and Academic Area in Boston.

Seller(s)

Morgan Stanley Infrastructure Partners (90%), Veolia (10%)

Deal Value

Not known

Closing Date

March 30

Financial Adviser(s)

RBC Capital Markets 

Legal Adviser(s)

Shearman & Sterling, Norton Rose Fulbright, Winston & Strawn, Foley & Lardner

Other Involved Parties

RBC Capital Markets, MUFG, Bank of America Merrill Lynch (private placement agents)
Advisian (WorleyParsons Group) (engineering adviser)
Charles River Associates (market consultant)
Moore McNeil (insurance adviser)

Notes:

This rare deal emerged from power purchase agreement extension talks between the owners of the project—Morgan Stanley Infrastructure Partners and Veolia—and its medical institution offtakers in 2017. While the PPAs were renewed through 2051, a group of hospitals—Beth Israel Deaconess Medical Center, Boston Children’s Hospital and the Dana-Farber Cancer Institution—negotiated a purchase option allowing them to buy the project within a set timeframe. Axium and Engie then forged a deal with the hospitals to buy the project in a unique back-to-back transaction requiring U.S. Federal Energy Regulatory Commission and Hart Scott Rodino approvals on a tight schedule. BDC acquired the project with the proceeds of a junior subordinated loan provided by Axium and Engie, which was converted into equity on the same day, March 30. The deal was financed with a bridge loan that was later taken out with a BBB-rated private placement, arranged by RBC, MUFG and BAML and priced at the tight end of guidance.

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