PPL to merge plants with investment firm
PPL Corp. is merging its entire generation business, including its coal plant in Washingtonville and nuclear plant in Berwick, with the investment firm Riverstone Holdings LLC.
The result is a new stand-alone, publicly traded company, Talen Energy Corp., which is planned to be headquartered in Pennsylvania.
When combined with Riverstone's current holdings, at 15,320 megawatts the merger nearly triples its portfolio and makes Talen Energy the third-largest investor-owned independent power producer in the nation, according to a press release.
A PPL employee said he received notice of the deal through an email at midnight Tuesday.
An estimated 3,500 employees work for PPL Energy Supply, the parent company of PPL's generation division, half of whom belong to a union, according to company spokesman George Lewis.
Many will transfer to the newly created Talen Energy, where it's expected wages and benefits including pensions will be similar to what they had at PPL, Lewis said. He added that existing union contracts will be honored by the company.
The transition won't be smooth for all of them. According to the press release, an unknown number of positions at the power plants and at the corporate level are expected to be eliminated. That will be sorted out during the transition.
PPL will have no continuing ownership interest in Talen Energy. It will continue to operate its utility divisions, which created 85 percent of its $7.2 billion revenue in 2013. Of PPL's near 10.5 million utility customers, 2.6 million reside in Pennsylvania and Kentucky and the remainder in the United Kingdom.
"It really was kind of undervalued as part of a much larger utility company," Lewis said of PPL's generation division, noting the utility division's success. "These businesses really will do much better if they're separated."
PPL Corp. shareowners will own 65 percent of Talen Energy and Riverstone will own 35 percent. The transaction is designed to be tax-free to PPL and its shareowners.
"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 William H. Spence, PPL chairman, president and chief executive officer.
PPL Corp.'s stock closed Tuesday at $34.69 a share, up 0.47 percent from Monday's closing, according to the New York Stock Exchange.
Before a U.S. nuclear power plant can change ownership, the Nuclear Regulatory Commission must review the application to transfer the operating license in a process that takes about a year, NRC Spokesman Neil Sheehan told The Citizen's voice in an email.
"The NRC will carefully evaluate a number of areas, including the prospective new owner's technical and financial qualifications to operate the plant. More specifically, the NRC would seek to ensure that the prospective new owner has the technical capabilities and financial wherewithal to safely run the plant and to safely decommission it when the time comes to do so," he stated.
Other approvals are needed from the Pennsylvania Public Utility Commission.
Paul A. Farr, PPL's executive vice president and chief financial officer, will become Talen Energy's president and chief executive officer. He will be joined on the company's board by four independent members appointed by PPL and three appointed by Riverstone, one of whom will be independent. The deal is expected to close within nine to 12 months.
PPL holdings to be transferred to Talen Energy are its nuclear plant, PPL Susquehanna, Berwick; coal plants, Colstrip, Colstrip, Mont., Conemaugh, Johnstown, J.E. Corette, Billings, Mont., Keystone, Johnstown, PPL Brunner Island, York Haven, PPL Montour, Washingtonville; hydroelectric units, PPL Holtwood, Holtwood, Wallenpaupack, Hawley; natural gas and oil, Ironwood, Lebanon, Lower Mount Bethel Energy and PPL Martins Creek, both in Martins Creek, and a fleet of 23 combustion turbines in central and eastern Pennsylvania.
The deal does not include PPL's hydroelectric units in Montana or its Kentucky holdings.
Talen Energy will have 27 sites in Maryland, Massachusetts, Montana, New Jersey, Pennsylvania and Texas.