AIG Global Investment Group has agreed to acquire 25 power plants from El Paso, a Houston-based natural gas conglomerate, for $746 million (€603 million) plus the assumption of $174 million in debt.
AIG is acquiring the assets on behalf of two private equity funds – AIG Highstar Generation and Northern Star Generation – “affiliated companies, and third party clients,” according to a press release.
In the statement, AIG Global Investment chairman and chief executive officer, Win Neuger, said the power plants had “stable long term cash flows principally with investment grade rated utilities.”
The power generation facilities are located in seven states across the US and together have a generation capacity of roughly 1,850 megawatts.
El Paso in the midst of a massive asset sale in order to reduce debt. The company has announced it will sell off an additional $3.3 billion to $3.9 billion over the next two years. Businesses on the block include domestic power plants, turbine inventory, and European power assets, according to the company’s Web site.
El Paso has done numerous deals with private equity firms recently. Last April, the company unloaded $120 million in assets to Boston-based Charlesbank Capital Partners.
In 2002, it sold its remaining coal operations to Greenwich, Connecticut energy specialist First Reserve for $53 million.
AIG Highstar has been a major acquirer of energy spinouts as large corporations in this space shed assets. In March the group teamed with CSFB Private Equity on a $306 million buyout of Duke/UAE Ref-Fuel from Duke Energy. AIG Highstar has also bought assets from CMS Energy Corp and Williams Companies.
AIG Highstar closed a $400 million fund in 2000.
The most recent El Paso spinout is expected to close in second quarter.
Lehman Brothers advised AIG, while Banc of America Securities advised El Paso.