PPL Building and PPL Plaza
The PPL Corp.'s PPL Building and PPL Plaza are seen at Ninth and Hamilton streets in Allentown.
(Express-Times File Photo)
Allentown-based PPL Corp. is halfway through approvals needed for the spinoff of its competitive electricity generation business into a new company.
PPL says the transaction aims to boost the value of its generation business. PPL will retain PPL Electric Utilities, which provides electric distribution service to about 1.4 million customers in Pennsylvania.
"It doesn't affect the electricity rate for PPL customers in any way," PPL spokesman George C. Lewis said.
The Pennsylvania Public Utility Commission on Wednesday approved the transfer of PPL Electric Utilities Corp.'s ownership interests in PPL Interstate Energy Co. to a new entity called Talen Energy Corp. The approval also authorized PPL's partner in the spinoff, Riverstone Holdings LLC, to take a 35 percent ownership interest in Talen.
Interstate Energy operates a PUC-regulated pipeline in Pennsylvania that transports either oil or natural gas to PPL's Lower Mount Bethel Energy natural gas plant and Martins Creek dual oil-gas plant. They operate side by side along the Delaware River in Lower Mount Bethel Township.
Announced last June, PPL's plan to spin off its electricity generation business still requires approvals from the U.S. Nuclear Regulatory Commission, because PPL owns the Susquehanna Steam Electric Station outside Berwick, Pennsylvania, and from the U.S. Department of Justice. PPL expects to close the deal in the second quarter of 2015.
The spinoff already has approval from the Federal Energy Regulatory Commission. As part of that approval, PPL agreed to sell some of its generation capacity in Pennsylvania, New Jersey and Maryland within 12 months of the deal closure. FERC determined Talen would own too much of the generation capacity in the market, Lewis said.
The PUC voted 5-0 to approve its end of the transaction approvals. The commission said in a statement Wednesday's transaction is part of a larger spinoff, in which PPL Corp. will transfer its electric generation and retail electric and gas supply business lines -- PPL Energy Supply LLC; PPL EnergyPlus LLC; and PPL Generation LLC, which owns Interstate Energy -- to the share owners of PPL Corp., and will immediately combine with the competitive generation assets controlled by Riverstone Holdings. The spinoff will result in the newly formed Talen Energy.
PPL hopes to make its Electric Utilities distribution service and the generation side of its business more attractive to investors by the spinoff, Lewis said.
"The spinoff is really a way to unlock the value that we felt was not reflected, the value of our generation business that we felt was not reflected in the PPL stock price," he said. "What we're looking at really is investors in utility companies, energy companies seem to favor what we call pure-play companies, that they look for companies that either are focused on the regulated utility business or focused on the competitive generation."
Upon completion of the deal, PPL shareholders will receive 55 percent of the stock of Talen Energy in a dividend, Lewis said: "They will get a fractional share of Talen stock for every share of PPL they own."
ABOUT THE COMPANIES
PPL Corp., traded on the New York Stock Exchange as PPL, had 2014 revenues of $11.5 billion, and is one of the largest companies in the U.S. utility sector. Its companies deliver electricity and natural gas to about 10 million customers in the United States and the United Kingdom.
Its partner in Talen, Riverstone, was founded in 2000 and is an energy and power-focused private investment firm with offices in New York, London, Houston and Mexico City. It conducts buyout and growth capital investments in the exploration and production, midstream, oilfield services, power and renewable sectors of the energy industry.