NextEra to Sell Texas Power Plants in $1.59 Billion Deal

Updated on
  • Transaction expected to close in first quarter of 2016
  • Luminant's purchase of plants approved by bankruptcy court

NextEra Energy Inc. agreed to sell two natural gas-fired generators in Texas to an affiliate of Energy Future Holdings Corp. for $1.59 billion as it seeks to reduce its exposure to the competitive power business.

Luminant will buy NextEra Energy Resources LLC’s La Frontera portfolio, which consists of the Forney and Lamar generating assets, according to a statement Friday. Their combined generating capacity can power about 1.5 million homes.

“We view this transaction as a significant positive, further de-risking NextEra Energy’s business model,” Michael Worms, a New York-based analyst for BMO Capital Markets, said in a note to clients Friday. “We would expect proceeds from the sale to be applied toward the continued build out of its renewables backlog.”

The sale ranks among the top 10 U.S. power deals this year, according to data compiled by Bloomberg. Utility owners have been divesting plants that sell power on competitive markets to focus on regulated operations where profit is more predictable. It comes also as Energy Future enters what may be the final phase of its reorganization, following 18 months in bankruptcy.

The affiliate has already received orders from a bankruptcy court approving the purchase. The transaction is expected to close in the first quarter of 2016, pending approval, and the purchase price includes estimated working capital. NextEra Energy Resources is a subsidiary of Juno Beach, Florida-based NextEra Energy.

Reduce Exposure

The deal “is consistent with our strategy of reducing our merchant exposure while recycling capital into our growing long-term contracted asset portfolio,” Armando Pimentel, president and chief executive officer of NextEra Energy Resources, said in a separate statement.

Luminant, the largest power provider in Texas, said the acquisition of the combined-cycle gas plants will help diversify its generation fleet.

“These plants are strategic investments that enhance our asset portfolio while building on our existing operations,” CEO Mac McFarland said.

Citigroup Inc. is serving as financial adviser to NextEra, and Hogan Lovells is legal counsel.

(Updates with Luminant comment in eighth paragraph.)
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