LS Power in $1bn deal with Dynegy

The power-focused private equity firm will acquire power plants and a 15% stake in the major US power generation corporation, now struggling with liquidity issues.

Private equity firm LS Power Associates has entered into a $1.025 billion deal with Dynegy that will see the US power corporation sell a 15 percent of itself as well as eight power plants to the power-focused investor.

The complex transaction allows Dynegy to increase its liquidity and eliminate Class B shares, according to a company press release. The deal calls for LS Power to transfer to Dynegy 245 million Class B shares in the corporation that LS Power already owned.

The deal comes several months after the unwinding of a joint venture between the two entities struck in 2006 that would have backed the development of energy projects. LS Power received a $19 million break-up fee when the cancellation of the joint venture was announced in January.

At the time, Bruce Williamson, chairman of Dynegy, said: “The development of new generation is increasingly marked by barriers to entry including external credit and regulatory factors that make development much more uncertain.”

LS Power said it would take over certain greenfield projects from the joint venture, including projects in Arkansas, Georgia, Iowa, Michigan and Nevada.

LS Power, the 70th largest private equity firm in the world according Private Equity International’s PEI 300 ranking, raised $3.1 billion fund in 2007.

The firm is led by Jim Bartlett, president of the private equity arm. LS Power is affiliated with New York hedge fund Luminus Management.