Capital Power acquires two U.S. LNG-fired power plants for $1.1 B
Capital Power Corp. has entered into two separate definitive agreements with CSG Investments Inc., a subsidiary of Beal Financial Corp., to acquire: 100% of the equity interests in CXA La Paloma LLC, which owns the 1,062-MW La Paloma natural gas-fired generation facility in Kern County, California; and under a newly formed 50/50 partnership between Capital Power Investments LLC and an affiliate of a fund managed by BlackRock’s Diversified Infrastructure business, 100% of the equity interests in New Harquahala Generation Company LLC, which owns the 1,092-MW Harquahala natural gas-fired generation facility in Maricopa County, Arizona.
Under the newly established 50/50 partnership, Capital Power and BlackRock will each be responsible for funding 50% of the cash consideration for the Harquahala Acquisition. Capital Power will be responsible for the operations and maintenance and asset management for which it will receive an annual management fee.
The net purchase price of the Acquisitions attributable to Capital Power is expected to be $1.1 B, subject to working capital and other customary closing adjustments. The acquisitions are each expected to close in 1Q 2024, subject to the receipt of regulatory approvals and the satisfaction of other customary closing conditions.
Following the closing of the acquisitions and accounting for Capital Power’s previously announced acquisition of the Frederickson 1 Generating Station, the company’s flexible and reliable gas-fired generation fleet is expected to be the 5th largest in North America and have a balanced geographic footprint across Canada and the U.S. on a net operating capacity basis.
The acquisitions are consistent with Capital Power’s strategy to acquire contracted gas-fired generation assets that are strategically positioned within their markets and create additional growth opportunities for both the company’s gas-fired and renewable generation businesses. Capital Power will leverage its deep knowledge and experience in plant operations to commercially optimize these assets and help drive long-term value as part of its broader fleet, the company said.
“Capital Power’s acquisition of La Paloma and the partnership in Harquahala’s gas generation assets marks a significant milestone in our strategic growth,” said Avik Dey, President and Chief Executive Officer of Capital Power. “These plants are well positioned to bolster our current portfolio and align with our commitment to providing reliable, affordable power solutions that support a balanced approach to the energy transition. This acquisition further unlocks an interesting market opportunity in WECC, where we can play a leading role in supporting the shift to low-carbon energy solutions through offering reliable generation while we grow our own renewables fleet. Lastly, this transaction underscores our dedication to delivering long-term value to our shareholders and advancing our position as a leader in the power generation sector.”
“We are pleased with how this strategic investment fully aligns with our financial objectives. The acquisition of La Paloma and the partnership in Harquahala offer an attractive entry point in the WECC market, are immediately accretive and maintains our investment grade credit ratings and balance sheet strength.” Said Sandra Haskins, SVP Finance and Chief Financial Officer of Capital Power.
“We are excited to partner with Capital Power for the acquisition of Harquahala, an efficient natural gas-fired power plant, which benefits from a contract for 100% of the plant’s capacity through 2031 with an investment grade utility,” said Mark Florian, Head of BlackRock’s Diversified Infrastructure Group. “This acquisition is consistent with our strategy of partnering with high-quality operators to acquire and manage contracted critical infrastructure that is essential to meet the growing demand for efficient, affordable and reliable energy.”
“AIMCo is pleased to participate in this private placement, which provides our clients with a compelling opportunity to invest in a high-quality company that is pursuing robust growth, diversification, and decarbonization strategies,” said David Tiley, Managing Director, Public Equities at AIMCo.
Net proceeds from Capital Power’s concurrent $400-MM subscription receipt offering are expected to fully address the planned discrete equity funding for the acquisitions. The remaining funding requirements are expected to be addressed via senior and hybrid debt financing at the corporate level, subject to market conditions. Capital Power’s contemplated funding plan preserves its strong balance sheet and financial flexibility.
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