CALGARY — TransCanada Corp. (TSX:TRP) has reached a deal to buy a gas-burning power plant in Pennsylvania for US$654 million from Talen Energy Corp., which is divesting some of its holdings to comply with regulatory requirements.
Calgary-based TransCanada says the 778-megawatt Ironwood power plant in Lebanon, Penn., is a natural extension of its power business in the U.S. Northeast region, where the company now has over 4,500 megawatts of generating capacity.
The plant is near the Marcellus shale formation, a source of competitively priced natural gas.
In a separate transaction, Talen Energy is selling two of its hydroelectric plants in Pennsylvania to Brookfield Renewable Energy Partners, which will pay US$860 million.
Brookfield Renewable (TSX:BEP.UN) will gain additional generating capacity totalling 292 megawatts. The 252-MW Holtwood station, on the Susquehanna River, is 13 kilometres downstream from Brookfield's 417-MW Safe Harbor facility.
All of Brookfield's output from the Pennsylvania plants is sold to the PJM regional power grid that serves 61 million customers across 13 states and the District of Columbia.
Talen is selling the power plants as part of a larger divestment required after the company was spun off in June from PPL Corp., an energy and utility company with holdings in the United Kingdom and several regions of the United States.
TransCanada — better known for its pipeline business — says the Ironwood acquisition will immediately add to earnings and cash flow and generate about US$90 to $110 million in earnings a year before interest, taxes, depreciation and amortization.
It will fund the acquisition with a combination of cash on hand and available credit. That deal is expected to close in the first quarter of 2016.
Brookfield Renewable, part of one of Canada's largest asset management groups, said it would fund a portion of the transation from an investment-grade debt offering that will close with the transaction.
The transactions are subject to various approvals and are expected to close in the first quarter of 2016.
The Canadian Press
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