As the sale process for a clutch of gas- and oil-fired projects in the U.S. enters a second round, bankers are speculating on the potential buyers and what they may do with the portfolio's capital structure.
Credit Suisse and Guggenheim Securities are the auctioneers on The Carlyle Group’s sale of its Nautilus Power portfolio, as previously reported (PFR, 3/18).
After first round bids last week, several would-be buyers have progressed to a second round, say bankers.
“It’s going to be pretty keenly contested,” says a project finance banker. “It’s a pretty small list of private equity guys buying New England and PJM, so I imagine the Arclights and Starwoods and LS Powers of the world might look at it.”
An investment banker, meanwhile, throws Capital Power into the mix "as they’re actively looking for U.S. assets.”
A third banker who also handles power transactions strikes a note of caution, however.
“The biggest challenge is, all these sellers are extremely value conscious,” he says. “It’s one thing when a utility comes in with a portfolio. When it’s private equity sponsors, there’s been a number of processes where they have pulled the process even after a second round. They have a reservation price and if that’s not it they keep holding it.”
The Nautilus Power portfolio comprises six primarily gas-fired assets located in New England and the Mid-Atlantic.
Carlyle has owned them since acquiring the portfolio from IFM Investors in 2016 (PFR, 2/2/16), drawing on equity from its Carlyle Power Partners II fund and debt from the term loan B market. Morgan Stanley was left lead on a $573.6 million repricing of Nautilus Power’s term loan B in late 2017 (PFR, 11/13).
Project finance bankers note that the debt is "portable," meaning that a potential buyer will not immediately have to put a new financing package in place, but a refinancing could follow.
At the time of its acquisition by Carlyle, the portfolio was known as Essential Power and also included several hydro projects that Caryle has since sold to Hull Street Energy (PFR, 6/28/17).
The remaining assets are:
- the 605.5 MW Newington gas-fired combined-cycle facility in Newington, N.H.,
- an 80% equity interest in the 236.8 MW Lakewood gas-fired combined-cycle project in Lakewood, N.J.,
- the 383 MW Ocean Peaking Power gas-fired plant, also in Lakewood,
- the 772.6 MW Rock Springs gas-fired peaker in Rising Sun, Md., and
- a portfolio of peakers totaling 291 MW in Massachusetts.
(The capacities given here are nameplate ratings from a 2017 filing with the U.S. Federal Energy Regulatory Commission.)
Carlyle portfolio company Cogentrix manages and operates the assets.