Panda Power Funds LP plans to sell a gas-fired plant in Texas, and Black Hills Corp. is reportedly weighing the sale of a stake in one of its gas utilities.
The M&A activity indicates some independent power generators are seeking to stabilize finances, while utilities are taking advantage of demand for stable, outperforming gas delivery vehicles.
William Nordlund, a partner in Panda Power Funds, confirmed in a Sept. 2 email that the private equity infrastructure firm plans to divest its 755-MW combined-cycle Panda Sherman Generating Station in Grayson County, Texas, north of the Dallas metro area, which operates in the Electric Reliability Council Of Texas Inc. market.
"The company has been liquidating its investments over time," Nordlund said about the Sherman plant, which entered service in 2014 and is operated by subsidiary Panda Sherman Power LLC. Bids are due in October.
Affiliate Panda Temple Power LLC, the project entity associated with a 1,572-MW combined-cycle plant in Texas, filed for Chapter 11 bankruptcy in 2017 and completed its reorganization in 2018.
Already up for sale is Talen Energy Supply LLC's 4,845-MW gas generation portfolio after a bankruptcy court approved a $1.55 billion equity rights offering backstop commitment, clearing the way for the Riverstone Holdings LLC-backed power provider to market either 100% of its new common equity or substantially all of its assets as part of a restructuring agreement.
As of Aug. 10, the restructuring committee for Talen had already received an unsolicited, all-cash offer to purchase 100% of Talen Energy Supply, the company said at that time.
Gas utilities growing in interest
On the gas utility side, Black Hills is considering selling a 20% stake in its gas local distribution company, or LDC, business, according to a recent SparkSpread report.
Company representatives declined to comment on "rumors and speculation." Black Hills serves about 1.3 million electric and gas customers in eight states under the trade name Black Hills Energy.
In a February 2021 earnings conference call, Black Hills President and CEO Linden Evans told investors that he felt "very confident" and "very strong" about the future of LDCs within the company's portfolio. Since then, however, utilities including Dominion Energy Inc., AltaGas Ltd., and CenterPoint Energy Inc. have made deals selling LDCs to private utility operators owned by financial entities at premium prices, while South Jersey Industries Inc. is due to be taken private by a JPMorgan Chase & Co.-advised vehicle.
As part of a strategic review, NiSource Inc. is also looking to sell one or more of its six LDCs to reweight the company's portfolio toward the electric power business, with executives saying in August they believe potential buyers remain interested.
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