Dynergy Inc. (NYSE:DYN) announced today that it will buy some gas and coal generation assets from Duke Energy Corp (NYSE:DUK) and Energy Capital Partners. The two deals are worth a total of $6.25 billion.
Dynergy nearly doubles capacity
According to Fox Business, the two acquisitions will almost double the company’s energy capacity, bringing it up to approximately 26,000 megawatts across the nation. They will also enable Dynergy to supply electricity to businesses and residents in four more states: Michigan, Ohio, Pennsylvania and Illinois.
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To pay for the acquisitions, the energy provider said it will issue approximately $5 billion worth of new unsecured bonds and $1.25 billion in equity and equity-linked securities. Also Dynergy said it secured $950 million in two corporate-level, incremental revolving credit facilities. That brings up the company’s total revolving credit capacity to $1.43 billion.
Dynergy expects both deals to close by the end of the first quarter in 2015.
What the deals mean for Dynergy
Dynergy CEO Robert Flexon believes the deals will improve his company’s financial outlook. He expects them to triple the energy provider’s adjusted EBITDA next year and increase its cash flow per share next year and beyond. Dynergy adds that its net operating loss position of $3.2 billion should save it almost $500 million in taxes by offsetting the full company’s taxable income.
The assets Dynergy is buying from Duke Energy include Duke’s non-regulated commercial energy generation business, for which it will pay $2.8 billion in cash. Included in that business are ownership interests in 11 different power plants and also Duke’s retail business in Ohio. Duke had said earlier this year that it wanted to sell the commercial generation business, saying that it brought “volatile returns” in a market that’s increasing competitive. Dynergy will pay the other $3.45 billion for some of Energy Capital Partners’ power generating assets.
Credit Suisse Group AG (ADR) (NYSE:AG) and Lazard advised Dynergy on both of the transactions, while Morgan Stanly (NYSE:MS) also advised the Energy Capital Partners deal and Goldman Sachs Group Inc. (NYSE:GS) advised Dynergy on the Duke Energy deal.