Buyout kings strike $3.65bn power deal

The Blackstone Group, Hellman & Friedman, Kohlberg Kravis Roberts and Texas Pacific Group have agreed to buy Texas Genco through their holding company GC Power Acquisition.

A private equity consortium comprising The Blackstone Group, Hellman & Friedman, Kohlberg Kravis Roberts and Texas Pacific Group have agreed to purchase power generation company Texas Genco from publicly held CenterPoint Energy for approximately $3.65 billion (€2.98 billion) in cash.

The investor group is making the purchase through GC Power Acquisition, a newly formed entity owned in equal parts by affiliates of each of the sponsoring firms.

The Texas Pacific partners leading the deal are Kelvin Davis and Michael MacDougall.

According to the press statement, the transaction will take place in two parts. In the fourth quarter of 2004, GC Power will acquire a Texas Genco unit that will be formed to own its own coal, lignite and gas-fired generation plants. In the first quarter of 2005, GC Power will purchase the remainder of the Houston-based company, the South Texas Project nuclear facility.

The deal comes on the heels of the power deal announced last month by Energy Investors Funds (EIF) Group. In the sixth investment for its recently closed United States Power Fund V, the firm bought Black River Energy and its assets including Black River Generation, located in Watertown, New York and Hawaii-based Hamakua Energy Partners.

Back in March, private equity heavy hitters The Carlyle Group and Riverstone Holdings, through its Carlyle/Riverstone joint energy venture, teamed with a unit of publicly traded energy services holding company Sempra Energy in the acquisition of 10 Texas power plants from American Electric Power for $430 million (€348 million).

GC Power was advised by Goldman Sachs, Deutsche Bank and Morgan Stanley, and the law firms Simpson Thacher & Bartlett, Stroock & Stroock & Lavan, and Vinson & Elkins.