PPL Corp. of Allentown announced this morning it has a deal with Riverstone Holdings LLC, a privately held global energy company, to spin off its competitive energy generation businesses and combine it with Riverstone’s portfolio to create a new, stand-alone publicly listed independent power producer to be called Talen Energy Corp.
“Talen Energy will be a very significant player in the U.S. competitive generation market, bringing together the best of two robust businesses with a very strong presence in the PJM region [in the eastern U.S.], as well as nearly 2,000 megawatts of generating capacity in the fast growing ERCOT market in Texas,” said William H. Spence, PPL chairman, president and CEO. (The PJM wholesale electricity market has more than 830 companies and serves 60 million customers.)
PPL’s regulated utility companies, including PPL Electric Utilities, is not involved in the agreement and will remain focused on delivering its existing service.
According to PPL, Talen Energy will combine 5,325 megawatts of capacity owned and operated by Riverstone at 15 sites in Maryland, New Jersey, Texas and Massachusetts with 9,995 megawatts of capacity owned and operated by PPL Generation at 12 sites in Pennsylvania and Montana.
Under the agreement, Talen Energy is expected to be the third-largest investor-owned independent power producer in the nation.
It would own and operate more than 15,000 megawatts of generating capacity in key U.S. competitive energy markets.
Riverstone is an energy and power-focused private investment firm founded in 2000 by David M. Leuschen and Pierre F. Lapeyre Jr. It has offices in New York, London, Houston and Mexico City.
Under the terms of the agreement, PPL Corp. will spin off PPL Energy Supply LLC, the parent company of PPL Generation LLC and PPL EnergyPlus LLC, to shareowners of PPL and then immediately combine that business with Riverstone’s generation business to form Talen.
PPL’s shareowners will own 65 percent of Talen Energy and Riverstone will own 35 percent. PPL Corp. will have no continuing ownership interest in Talen Energy.
Talen Energy will be headquartered at a yet-to-be-determined location in Pennsylvania. PPL Corp. and the company’s Pennsylvania electricity delivery operation, PPL Electric Utilities, will continue to be headquartered in Allentown.
While the transaction represents a significant change for all company stakeholders, Spence said in a press release that PPL decided on this direction following an in-depth analysis of its business mix.
“Given the challenges, uncertainties and opportunities in the wholesale power markets, maintaining the status quo was not a viable option. This transaction provides greater clarity for shareowners, our PPL Energy Supply employees, customers and the communities we serve,” Spence said.
Following the spinoff, PPL Corp. will focus on the high-performing regulated utilities it owns and operates in the United Kingdom, Kentucky and Pennsylvania, serving more than 10 million customers. These regulated businesses, which had 2013 revenues of $7.2 billion, provided more than 85 percent of PPL Corp.’s 2013 earnings from ongoing operations.
The company said it expected to change the name on PPL’s existing power plants to Talen Energy Corp., but with the existing staff.