ArcLight to buy TransCanada’s hydro portfolio for over $1 billion

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ArcLight to buy TransCanada’s hydro portfolio for over $1 billion

Wed, 11/02/2016 - 12:11pm -- tim

by Timothy McQuiston Vermont Business Magazine ArcLight Capital Partners, based in Boston, announced Tuesday that its affiliate, Great River Hydro, has signed a definitive agreement to acquire TransCanada’s New England hydroelectric power portfolio for $1.065 billion. These dams include those on the Connecticut and Deerfield rivers in Vermont. All workers are expected to be retained. The state of Vermont formed a committee and briefly considered purchasing the dams itself after TransCanada announced in March of this year that it would sell the hydro plants to help it buy a Texas gas pipeline company. The state also considered buying the facilities in 2005, when USGen ultimately sold them to Calgary-based TransCanada for $505 million.

With 13 facilities on the Connecticut and Deerfield rivers in Vermont, New Hampshire and Massachusetts, TransCanada’s 584 MW renewable power portfolio is the largest conventional hydro system in New England. Vermont Yankee, by comparison, had a running output of 605 MW before it closed in December 2014. The TransCanada portfolio includes the 192 MW Moore facility, the largest conventional hydro station in New England, and 12 other facilities totaling 392 MW. The transaction is expected to close in mid-2017, subject to customary regulatory and other approvals.

TransCanada map and table of hydro assets.

According to the Valley News, The Wilder dam paid $750,000 in annual tax revenue to Hartford in 2016, or about 6 percent of the town’s total tax revenue and Lebanon, NH, got $563,000 in tax revenue for the city during the year’s first half period, according to online tax records.

In a long-running dispute between TransCanada and the town of Rockingham, the Vermont Supreme Court ruled in September that the Bellows Falls facility should be assessed at $127.4 million, not the $84 million TransCanada wanted.

On a per megawatt basis, the ultimate sale of all the hyrdro stations was just over what TransCanada wanted in Bellows Falls ($1.8 million per MW versus $1.7 million) and 44 percent lower than what the Supreme Court ruled ($2.6 million per MW).

Great River Hydro said in a statement that it anticipates a smooth transition of ownership. The company has committed to retain all existing operational personnel, plans to assume the recently negotiated union contract, and will continue the FERC relicensing process currently underway at the Bellows Falls, Wilder and Vernon facilities.

ArcLight Capital is one of the most experienced owners and operators of renewable power assets in the United States. Founded in 2001, the firm has invested more than $3.1 billion of capital in renewable power assets, representing approximately 5,000 MW of generation. The firm has successfully led some of the most notable renewable projects in the United States, including developing and operating one of the largest wind farms in the world. The firm is committed to maintaining strong partnerships with employees, host communities, states and other local stakeholders.

ArcLight also has over a decade of experience owning and operating hydroelectric power generation facilities in New England. Since 2006, ArcLight has acquired and operated 10 hydro facilities along the Penobscot, Union and Androscoggin rivers in Maine.

Bellows Falls Island Hydro 1. VBM photo

Great River Hydro will be led by Scott Hall, a long-term portfolio executive of ArcLight with over 27 years of experience managing hydroelectric generating facilities and companies in the Northeast. Mr. Hall has been directly responsible for all facets of hydroelectric company operations, including employee management, environmental compliance, facility maintenance and operations, and business development activities. Hall has also been an active leader in a variety of stakeholder processes that addressed numerous socio-economic issues related to river flows, energy development and natural resource management.

“We have been incredibly impressed by the quality of both the hydroelectric facilities and the operations team,” said Hall. “I am very excited to work with the team to continue the level of excellence they have already achieved in providing reliable, renewable power in Vermont, New Hampshire and Massachusetts.”

“We are thrilled to expand our renewable footprint by acquiring these premier hydroelectric assets from TransCanada,” said Dan Revers, Managing Partner and co-Founder of ArcLight. “New England is a key geography for ArcLight, and we look forward to working with local communities and other constituencies across the region.”

TransCanada Hydro

  • Connecticut River: Vermont and New Hampshire – 49-MW Bellows Falls, 144-MW Comerford, 11-MW McIndoes, 192-MW Moore, 37-MW Vernon and 41-MW Wilder
  • Deerfield River Vermont -- 41-MW Harriman and 5-MW Searsburg
  • Massachusetts – 7-MW Deerfield No. 2, 7-MW Deerfield No. 3, 6-MW Deerfield No. 4, 14-MW Deerfield No. 5 and 6-MW Sherman

There are approximately 85 hydroelectric generation facilities operating in Vermont and on waters bordering other states. More than a third of those are owned by Green Mountain Power.

TransCanada

TransCanada announced Tuesday that it sold not only its New England hydro business, but also its wind business in order to buy Columbia Pipeline Partners LP for approximately US$915 million. It expects to realize approximately US$3.7 billion from the monetization of its US Northeast Power business. The amount is expected to be realized through the sale of Ravenswood, Ironwood, Ocean State Power and Kibby Wind to Helix Generation, LLC, an affiliate of LS Power Equity Advisors for US$2.2 billion and TC Hydro to Great River Hydro, LLC, an affiliate of ArcLight Capital Partners, LLC for US$1.065 billion, with the remainder attributed to TransCanada's power marketing business which is expected to be realized going forward.

TransCanada said in announcing a series of moves Tuesday, that proceeds from these sales and future realization of value of the marketing business will be used to repay a portion of the US$6.9 billion senior unsecured asset bridge term loan credit facilities (Columbia bridge loan facilities) which were used to partially finance the Columbia Pipeline Group, Inc acquisition completed July 1, for an aggregate purchase price of approximately US$13 billion, including the assumption of approximately US$2.8 billion of debt.

"The sale of our merchant US Northeast Power business to fund a portion of our acquisition of Columbia will further enhance the stability and predictability of our earnings and cash flow streams and support a strong and growing dividend," said Russ Girling, TransCanada's president and chief executive officer.

On its Website, TransCanada says it pays property taxes in a total of 53 communities in Vermont, New Hampshire and Massachusetts.

The wind and gas assets TransCanada sold to Helix Generation, LLC, for $2.2 billion in cash were:

  • Ravenswood (Queens, New York) – 2,480 megawatts, multiple-unit generating natural gas facility using dual fuel-capable steam turbine, combined-cycle and combustion turbine
  • Ironwood (Lebanon, Pennsylvania) – 778 megawatts, natural gas combined-cycle facility
  • Ocean State Power (Burrillville, Rhode Island) – 560 megawatts, natural gas combined-cycle facility
  • Kibby Wind (Franklin County, Maine) – 132 megawatts, wind farm

About ArcLight Capital Partners

ArcLight is one of the leading private equity firms focused on energy infrastructure investments. Founded in 2001, it has helped pioneer an asset-based private equity approach to investing in the dynamic energy sector. It has invested approximately $17 billion in 101 transactions since inception. Based in Boston, its 29-person investment team employs a hands-on value creation strategy that utilizes our in-house technical, operational and commercial specialists as well as our 400-person asset management affiliate. More information about ArcLight, and a complete list of ArcLight's portfolio companies, can be found at www.arclightcapital.com.

Source: BOSTON, MA (November 1, 2016) – ArcLight Capital Partners. TransCanada