Canadian energy company Veresen has announced it will divest its power generation business for a total value of $1.18bn in three separate deals.
Veresen owns energy infrastructure assets in Canada and the US. It has decided to sell the company’s largest division and use proceeds for funding other growth projects.
Veresen's president and chief executive officer (CEO) Don Althoff said: “The sale of our power business is an important milestone in the delivery of our long-term business strategy, and we are very pleased with the outcome.”
Expected to close in Q2, 2017, each of the agreements is subject to closing adjustments and customary conditions.
Althoff added: “Additionally, the divestiture strengthens our balance sheet, further underpinning our dividend and providing greater flexibility to fund the incremental growth projects we expect to secure over the next 12 to 18 months.”
Of the three deals, Veresen will sell its thermal power business to the Canadian energy generation company Capital Power. Veresen has entered into an agreement with Capital Power to sell two gas-fired power plants and two waste heat assets.
Capital Power's president and CEO Brian Vaasjo said: “This transaction helps reduce our overall risk and enhance our ability to pay dividends and build shareholder value.
“Given Capital Power's deep experience in operating thermal facilities and the ability to optimise value, these assets are an ideal addition to our fleet and an excellent strategic fit.”
The two natural gas-fired power facilities comprise the 84MW East Windsor Cogeneration Centre (East Windsor) and the 400MW York Energy Centre (York Energy).
Under the terms of the deal, Capital Power will purchase 284MW of generation from the two power assets and a 50% interest in the York Energy facility. The company will also operate the two facilities. In addition, the deal includes the acquisition of zero-emissions waste heat generation from Veresen’s two 5MW facilities.
The purchase price for the transaction is $225m in total cash consideration, which is subject to working capital adjustments and other closing adjustments.