Dive Brief:
- PPL Corporation and Riverstone Holdings will merge to form Talen Energy Corp which will own and operate 15,320 megawatts of merchant generation and be the third biggest U.S. independent power producer.
- Talen will include Riverstone’s 5,325 megawatts of generation capacity at 15 sites in Maryland, New Jersey, Texas, and Massachusetts and PPL Corp’s 9,995 megawatts of capacity at 12 sites in Pennsylvania and Montana, and be publicly traded on the NYSE, with PPL Corp shareholders owning 65% of Talen and Riverstone’s owning 35%.
- Talen Energy will have 40% of its capacity in natural gas, 40% in coal and 15% in nuclear, with a strong presence in the deregulated ERCOT Texas market and about 83% of its generation in the PJM territory, the biggest deregulated market in the world. But, as PPL Corp referenced in the merger announcement, present wholesale power markets are especially full of “challenges, uncertainties and opportunities.”
Dive Insight:
This merger allows PPL Corporation to focus on its 10 million customer strong regulated utilities in the UK (1.4 million customers), Kentucky (1.2 million customers ) and Pennsylvania (7.8 million customers), which had 2013 revenues of $7.2 billion and provided more than 85% of PPL Corporation's 2013 earnings.
PPL plans to invest $16 billion over the next five years in transmission facilities, in regulated power plants, and in environmental improvements.
PPL Corp continues to expect 2014 earnings of $2.15 to $2.30 per share and now predicts 2015 earnings of $2.05 to $2.25 per share and a 4% compound annual growth rate in earnings per share. Talen Energy projects 2015 earnings to be “about” $1.07 billion.
The transaction, which must go through Nuclear Regulatory Commission, Federal Energy Regulatory Commission and Pennsylvania Public Utility Commission approvals, a Hart-Scott-Rodino review, and other closing procedures, is expected to be complete in nine to 12 months.
Louisville Gas and Electric Company and Kentucky Utilities Company will continue to own and operate 8,100 megawatts of PPL regulated capacity serving customers in Kentucky and southwestern Virginia.
