PPL Corporation (NYSE: PPL) and Riverstone Holdings LLC, a leading energy and power investment firm, announced Monday (6/9) a definitive agreement to combine their merchant power generation businesses into a new stand-alone, publicly traded Independent Power Producer. The new company, which will own and operate a diverse mix of 15,320 megawatts of generating capacity in key U.S. competitive energy markets, will be called Talen Energy Corporation. Based on current generating capacity statistics, Talen Energy would be the third-largest investor-owned IPP in the nation.
Under the terms of the agreement, at closing, PPL Corporation 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 Energy Corporation, an independent publicly traded company expected to be listed on the New York Stock Exchange.
Utilities Service Alliance (USA) member PPL Susquehanna, LLC, which operates two Boiling Water Reactors (BWRs) in Northeastern Pennsylvania generating more than 2,630-megawatts of electricity, represents the nuclear generation component of PPL Energy Supply, LLC.
Upon closing, PPL Corporation’s shareowners will own 65 percent of Talen Energy and Riverstone will own 35 percent. PPL Corporation will have no continuing ownership interest in Talen Energy.
“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, 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 Chief Executive Officer. “Talen Energy will have significant scale, a very competitive cost structure and the financial agility to pursue growth opportunities.”
Spence announced that, upon closing, Paul Farr, PPL’s executive vice president and Chief Financial Officer, will be Talen Energy’s president and Chief Executive Officer and a director of the new corporation. To facilitate the transition process, Farr is being named president of PPL Energy Supply, effective June 10.
“As stand-alone companies, PPL Corporation and Talen Energy each will have compelling growth prospects, and we expect the financial markets will ascribe valuations that more appropriately recognize the inherent strengths of each company,” said Spence.
While the transaction represents a significant change for all company stakeholders, Spence said 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,” said Spence.
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. The new company’s planned 15,320-megawatt portfolio will have excellent fuel diversity, with 40 percent natural gas, 40 percent coal and 15 percent nuclear.
About 83 percent of the generating capacity to be owned by Talen Energy is located in the region served by the Pennsylvania-New Jersey-Maryland Interconnection, the world’s largest wholesale electricity marketplace.
“The employees of Susquehanna will continue to operate the plant with same unwavering commitment to safe and responsible operations that they have demonstrated for more than 30 years,” said Tim Rausch, PPL Susquehanna Chief Nuclear Officer.
The transaction is subject to approval by the Nuclear Regulatory Commission and the Federal Energy Regulatory Commission (including the required market power analysis); a Hart-Scott-Rodino review; certain approvals by the Pennsylvania Public Utility Commission; and other customary closing conditions. The transaction, which does not require PPL shareowner approval, is expected to close in nine to 12 months.
Talen Energy will be headquartered at a yet-to-be-determined location in Pennsylvania.