Dynegy to buy $6.25B of assets from Duke Energy and Energy Capital

U.S. power company Dynegy said on Friday that it would buy coal and gas generation assets from Duke Energy and Energy Capital Partners, in two deals totaling $6.25 billion.

Dynegy shares rose on the New York Stock Exchange.

The acquisitions will nearly double Dynegy's generating capacity to about 26,000 megawatts (MW) nationally and allow the company to provide retail electricity to residents and businesses in Illinois, Ohio, Pennsylvania and Michigan.

Hennepin Power Plant, owned by Dynegy Inc., stands in Hennepin, Illinois.
Daniel Acker | Bloomberg | Getty Images
Hennepin Power Plant, owned by Dynegy Inc., stands in Hennepin, Illinois.

Dynegy, which had a market capital of $2.98 billion as of Thursday's close, said it intends to issue about $5 billion in new unsecured bonds and $1.25 billion in equity and equity-linked securities to fund the deals.

The company also said it secured two incremental corporate-level revolving credit facilities totaling $950 million, bringing its total revolving credit capacity to $1.43 billion.

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"The addition of these portfolios transforms Dynegy by adding considerable scale in the PJM (Pennsylvania, New Jersey, Maryland) and New England markets," Dynegy Chief Executive Robert Flexon said.

Flexon expects the deals to improve the company's financial outlook by tripling its 2015 adjusted EBITDA and adding to free cash flow per share in 2015 and beyond.

Dynegy said its $3.2 billion net operating loss position would offset the combined company's taxable income, providing nearly $500 million in tax savings.

Dynegy will buy Duke Energy's non-regulated Midwest commercial generation business for $2.8 billion in cash.

The business includes ownership interests in 11 power plants and Duke Energy Retail Sales, the company's competitive retail business in Ohio, Duke Energy said in a separate release.

Duke Energy said in February that it was looking to sell its Midwest commercial generation business, citing "volatile returns" in a competitive market.

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Dynegy will also buy some Energy Capital Partners power generating assets for $3.45 billion.

Both deals are expected to close by the end of the first quarter of 2015.

Lazard and Credit Suisse acted as Dynegy's financial advisers on both deals. Morgan Stanley was lead financial adviser to Dynegy on the Energy Capital Partners transaction and Goldman Sachs acted as financial adviser on the Duke Energy transaction.

Read MoreDynegy to spend $6.25B on power plant acquisitions

—By Reuters

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