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This article is provided to FT.com readers by mergermarket—a news service focused on providing actionable, origination intelligence to M&A professionals. www.mergermarket.com
GDF SUEZ Energy North America (GSENA) is actively seeking to acquire an unregulated power plant portfolio and has a specific asset package in PJM (Pennsylvania, New Jersey and Maryland power pool) on its radar, a source with knowledge of the situation told mergermarket.
The company has not approached the target, the source said, declining to disclose the identity of the asset package.
One logical target is Edison Mission Energy (EME), the IPP (independent power producers) subsidiary of Edison Mission Group (EMG), which manages Edison International’s power generation business and other unregulated subsidiaries. It owns or leases interests in 44 power plants, with an aggregate capacity of 11,344 MW, of which EMG’s ownership share is 10,441 MW.
EME has a significant amount of coal in its portfolio, which GDF finds unattractive, but it does have a presence in PJM, the source said. It also has renewable energy, which could serve as a “sweetener” for a deal, he said.
EME subsidiary Midwest Generation has six plants in Illinois and most of their output is sold into PJM, according to Edison’s web site. On the renewables side, it has a biomass facility in New York and one of the largest portfolios of wind energy projects in the US, also according to the site.
This news service recently reported that Ameren Corporation, a St. Louis, Missouri-based utility holding company, could try once again to sell its approximately 5,000 MW non-regulated power plant portfolio. The company had retained Goldman Sachs last year as its financial advisor on the sales process, but pulled it off the market due to pricing issues, the report said.
The source said GSENA did not participate in Ameren’s auction due to its amount of coal. When asked about Dynegy, he dismissed it as a target as well, as it too has coal.
Most recently, GSENA was involved in the auction for Conectiv, the source said, declining further comment on the matter. Pepco ended up selling Conectiv (3,860 MW) to Calpine on 21 April for USD 1.7bn.
An industry banker said it would make sense for GSENA to take a look at BostonGen’s generation fleet, which is the third largest in New England, serving the Boston metropolitan area. It has 2,942 MW of merchant generation capacity and approximately 80% of its fleet is comprised of natural gas-fired, combined-cycle generating plants.
This news service reported on 12 May that BostonGen was receiving indicative bids and it was set to draw up a shortlist. The report said Consellation Energy and First Reserve were taking a look, and an industry source said Energy Capital Partners is taking a look as well. BostonGen announced on 12 April that its Board of Managers had approved the initiation of a strategic sales process in order to restructure the company.
While BostonGen is part of ISO New England (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont) and not PJM, ISO is a very good, liquid market, said the industry source. PJM and ISO are close geographically so it would make sense for GDF to have an interest in both areas, he said.
With regard to the regulatory side, the source with knowledge said GSENA would not consider any such acquisitions as the company lacks a deep penetration into the regulated landscape. However, it would be interested in helping regulated utilities de-risk by acquiring their unregulated arms, he said. He added that any transaction would have to be immediately accretive to earnings rather than in two to three years.
GSENA is a division of GDF SUEZ Energy Europe & International, which is the energy business of GDF SUEZ. It has 23 renewable plants, 60 power, cogeneration, steam and chilled water facilities and more than 7,000 MW of electric generation capacity. It serves 20% of New England’s annual natural gas demand.
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