Power generation company LS Power Associates L.P. is expected to make an announcement today that it will buy nine US power plants from one-time development partner Dynegy.

LS Power will pay about $1bn and return nearly $500m in shares to Houston-based Dynegy, sources have told the Wall Street Journal.

The deal effectively unwinds a 2006 joint venture with the aim of creating the largest new developer of coal-fired power plants in the US, the paper reports.

Over the past year, the recession has shrunk both the country’s power-generating needs and developers’ financial ability to build plants. Dynegy, which is a wholesale power generator, has been especially hard hit.