Talen Energy agrees to sell three Pennsylvania power plants

Natural gas plant

Talen Energy Corp. agreed to sell three Pennsylvania power plants with a total combined generating capacity of 996 MW for $1.51 billion in gross cash proceeds, subject to customary purchase price adjustments.

The sale of the Ironwood combined-cycle, natural gas-fired plant, and the separate sale of the Holtwood and Wallenpaupack hydroelectric projects, are part of a requirement to divest certain assets in specific regions of the PJM Interconnection, which include portions of eastern Pennsylvania, New Jersey and Maryland, to comply with a December 2014 Federal Energy Regulatory Commission order approving the transactions that formed Talen Energy.

The 704 MW Ironwood plant is being sold to a unit of TransCanada Corp. (TransCanada) for a total purchase price of $654 million, subject to customary purchase price adjustments. In connection with the transaction, Talen Energy expects to repay about $42 million of indebtedness, plus a customary pre-payment premium, associated with the facility.

The Holtwood and Lake Wallenpaupack hydroelectric projects, with a combined generating capacity of 292 MW, are being sold to a unit of Brookfield Renewable Energy Partners L.P. for $860 million, subject to customary purchase price adjustments.

The transactions are expected to result in net proceeds of about $1.16 billion. In the near term, Talen Energy plans to use proceeds of the transactions to retire pre-payable and maturing debt.

Ironwood, Holtwood and Wallenpaupack would have been expected to contribute Adjusted EBITDA and Adjusted Free Cash Flow on a full-year 2016 basis of about $140 million and $80 million, respectively, and Net Income and Cash from Operations on a full-year 2016 basis of about $56 million and $101 million, respectively.

Both transactions are expected to close in the first quarter of 2016, following the receipt of necessary regulatory approvals and other customary closing conditions.

For the Ironwood transaction, Credit Suisse served as financial advisor to Talen Energy and Kirkland & Ellis LLP was transaction counsel.

For the hydro transaction, RBC Capital Markets served as financial advisor to Talen Energy and Simpson Thacher & Bartlett LLP was transaction counsel.

Talen Energy is one of the largest competitive energy and power generation companies in North America. Our diverse generating fleet operates in well-developed, structured wholesale power markets.

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