Dynegy, a power generator company based in Houston, posted a loss of $800 million for its second quarter. For comparison, the company posted a $388 million profit for the second quarter of 2015.
The report was made public just as Dynegy prepares to unveil updated branding and logos along the ongoing acquisition of 17 power plants this year. Six of these plants are in Texas while other plants will be attained through dealings with the Energy Capital Partners private equity firm and Engie, the Paris-based company formerly known as GDF Suez. The dealings will transform Dynegy into one of the country’s biggest independent power production companies.
Bob Flexon, president and chief executive of Dynegy, said that company is preparing for a “well-constructed portfolio composed of the right assets in the right markets supported by the right balance sheet that generates a strong return for our shareholders.” This means more natural gas, less coal power.
According to Dynegy, the reported loss is due in part to large periods of downtime while five of its plants went through maintenance. The natural gas-fired plants were located across the country in Illinois, New York, Ohio, and Pennsylvania. Dynegy also blamed mild weather for the lowered consumption of power. Finally, it cited the latest withdrawal of its Illinois-based Wood River coal plant.
The power market is down and cheaper natural gas prices have in turn made coal expensive so Dynegy plans to close no less than three of its coal-fired plants in Illinois by the end of the year. The Massachusetts-based Brayton Point coal plant will also be closed sometime in 2017.
Dynegy also publicized the sale of a 50 percent stake in the company’s Elwood gas-fired power plant. The Illinois plant was sold to Tokyo’s J-Power for $172.5 million. According to Flexon, the money will be forwarded to the $3.3 billion arrangement with Engie.
The company is also prepared to sell some or all of its three California-based plants. On Thursday, Flexon said, “Right now California is really the only thing that’s on the table.” After the Engie deal closes, Dynegy will then have over 3,600 employees which includes nearly 400 in Houston.
The purchase of the 17 plants will be conducted through a joint venture with Energy Capital. Originally, Dynegy planned to purchase Energy Capital’s 35 percent stake over the course of five years, but reported back in June that it would have to borrow more cash in order to close the deal by the end of 2016. When the buyout was first announced, Dynegy was to pay $930 million. Since then, the price has dropped to just $750 million.
Combined, the Engie plants produce over 9,000 megawatts of power. Just a single megawatt is what’s usually needed to power 200 Texan homes on a hot, summer’s day. Initially, Engie wished to deliver its convoy of fossil fuel-based plants to the U.S., but has stressed that it will not leave the country. Engie will preserve its North American presence through its office in Houston.
Article written by HEI contributor Briana Steptoe.