Blackstone is purchasing the facilities from Direct Energy, a Houston-based supplier of electricity and energy-related services in the U.S. and Canada, according to a statement today from the power company. Direct Energy will keep the right to buy the power produced by the plants at a certain price for three years, the company said. The sites have combined capacity of 1,295 megawatts.
The Texas power market is projected to be among the fastest-growing in the U.S., according to North American Electric Reliability Corp. State regulators are considering changes to market rules that would pay power producers to keep excess generation capacity in reserve as population growth threatens to outstrip supplies.
“This transaction allows us to realize value from our gas-fired fleet while ensuring stability of price and supply in the Texas power market through the call option arrangement,” Badar Khan, Direct Energy’s chief executive officer, said in the statement.
Blackstone last year raised $2.5 billion for its first fund dedicated to energy investments, managed by David Foley. The New York-based firm, which oversaw $248 billion in assets as of Sept. 30, last month bid for Irish utility company Bord Gais Eireann’s retail unit, which the Irish government last week said it plans to sell to a Centrica-led group for 1.12 billion euros ($1.54 billion).
Before Blackstone raised its Blackstone Energy Partners pool, it had invested in energy-related companies since 1997 through its private-equity funds, according to the firm.
One of Blackstone’s biggest deals in merchant power, which is the investor-backed process of selling electricity wholesale through the grid, was the 2004 buyout of Texas Genco Holdings Inc. for $3.65 billion. Blackstone joined peers KKR & Co. (KKR), TPG Capital and Hellman & Friedman LLC in the deal. The group made more than 6.5 times its money when it agreed to sell the company less than a year later, according to a Blackstone fund marketing document.
Power producer Calpine Corp. (CPN) said on Dec. 2 it paid $625 million, or about $595 per kilowatt, for a 1,050-megawatt gas plant in Texas owned by MinnTex Power Holdings LLC, a private investment fund managed by Wayzata Investment Partners LLC. A new natural gas plant costs about $1,000 a kilowatt to build, according to U.S. Energy Department data.
The Direct Energy plants being sold to Blackstone are in Bastrop, Mission and Paris, Texas, according to the statement. The transaction is expected to close in the first quarter of 2014.