REAL-ESTATE

Talen sells Lake Wallenpaupack to Brookfield

Peter Becker Managing Editor
Lake Wallenpaupack was created by P.P. & L. in 1926 as a hydroelectric facility. PPL went through a merger that was approved in June 2015, creating Talen Energy Corporation. Talen in turn is selling the lake and its power plant facility to Brookside Renewable, announced October 8th. The lake cover 5,700 acres with 52 miles of shoreline, stretching 14 miles on the border of Wayne and Pike counties, PA.

  WAYNE/PIKE - We heard it may happen. On Thursday morning, October 8, announcement was made that Lake Wallenpaupack, along with its hydroelectric facility, is being purchased.

   Talen Energy Corporation, which took over from PPL in June, has agreed to sell three Pennsylvania power plants, including Wallenpaupack. Lake Wallenpaupack Hydroelectric was purchased by Brookfield Renewable Energy Partners L.P.

    Lake Wallenpaupack was sold as a package with another power generating plant, Holtwood, for $860 million. The two plants have a combined generating capacity of 292 megawatts.

   Talen Energy has also sold the 704-megawatt Ironwood combined-cycle, natural gas-fired plant, to a subsidiary of TransCanada Corporation for $654 million.

  When the merger was taking place between PPL’s generating company and another electric utility, Riverstone, creating Talen Energy, the Federal Energy Regulatory Commission (FERC) indicated in December 2014 that the larger, merged company may have to shed some of its assets.

   Talen Energy was required to sell off assets in specific regions of the PJM Interconnection, which include portions of eastern Pennsylvania, New Jersey and Maryland. Lake Wallenpaupack was identified at the time as one of the potential plants that might be let go if FERC required.

••• Local operations stable

    Katie Lester, Community Relations Director at Lake Wallenpaupack since it was owned by PPL, said that the sale to Brookfield will only mean a change in name and its logo, to the general public.

   Brookfield, like Talen, must honor the FERC license renewal obtained by PPL, which is good through 2045. This applies both to the Shoreline Management Plan and the Recreation Plan for the 5,700 acre lake and property around it opened by the power company.

   Lester said that Brookfield is a good company to work with. Under PPL and Talen, staff at the Wallenpaupack facility worked closely with Brookfield in the past, meeting at conferences and comparing policies and plans. She said that Brookfield intends to maintain the same staff at the Wallenpaupack facility.

     She said that Wallenpaupack was sold together with Holtwood because the two power plants are under the same legal entity, Holtwood LLC. Based in Lancaster and York counties, Holtwood is a hydroelectric plant with a capacity of 248 megawatts.

   Lake Wallenpaupack’s power generating capacity is much smaller, at 44 megawatts.

  Lester stated that they knew Brookfield was “in the running” but only learned about the decision to sell to Brookfield, Thursday morning. “We’re very excited,” she said.

   Pennsylvania Power & Light Inc. established Lake Wallenpaupack in 1926.

    "Brookfield Renewable Energy Partners is an experienced owner and operator of hydroelectric projects and has extensive operations across North America, including the Safe Harbor hydroelectric project on the Susquehanna River just upstream from Holtwood. We recognize and appreciate the dedicated employees who operate, maintain and support the hydro plants. They have done an outstanding job, and their skill and experience will prove invaluable to Brookfield in continuing the legacy of operating excellence and citizenship at both facilities," Paul Farr, Talen Energy President and Chief Executive Officer, said in a press release.

••• Business details

   Both sales are subject to customary purchase price adjustments. A closing is expected by the end of the first quarter in 2016.

  In connection with the sale of Ironwood, Talen Energy expects to repay approximately $42 million of indebtedness, plus a customary pre-payment premium, associated with the facility.

    The transactions are expected to result in net proceeds of approximately $1.16 billion. In the near term, Talen Energy plans to use proceeds of the transactions to retire pre-payable and maturing debt.

      Ironwood, Holtwood and Wallenpaupack would have been expected to contribute Adjusted EBITDA and Adjusted Free Cash Flow on a full-year 2016 basis of approximately $140 million and $80 million, respectively, and Net Income and Cash from Operations on a full-year 2016 basis of approximately $56 million and $101 million, respectively.

Both transactions are expected to close in the first quarter of 2016, following the receipt of necessary regulatory approvals and other customary closing conditions.

  For the Ironwood transaction, Credit Suisse served as financial advisor to Talen Energy and Kirkland & Ellis LLP was transaction counsel.

   For the hydro transaction, RBC Capital Markets served as financial advisor to Talen Energy and Simpson Thacher & Bartlett LLP was transaction counsel.

Information online:

Talen Energy Corp. www.talenenergy.com

Brookfield Renewal Energy Partners www.brookfieldrenewable.com