TransCanada Corporation (TSE:TRP, Mkt cap 32.02B, P/E 18.54, Div/yield 0.52/4.61, EPS 2.44, Shares 709.00M) believes it has acquired a “unique opportunity” in agreeing to buy a gas-burning power plant in Pennsylvania for US$654 million from Talen Energy Corp.
Calgary-based TransCanada says the 778-megawatt Ironwood power plant in Lebanon, Penn., is a “natural extension” of its northeast power business, where the company now has over 4,500 megawatts of generating capacity.
Russ Girling, TransCanada’s president and chief executive officer, said the acquisition strengthens its portfolio of assets in the region.
“This relatively new and highly efficient gas-fired power plant provides us with a solid platform from which to continue to grow our already substantial wholesale, commercial and industrial customer base in this market area,” he said in a statement.
TransCanada, better known for its pipeline business, explained the Ironwood power plant delivers energy into the PJM power market, North America’s largest and most liquid energy region which includes a three-year forward capacity market.
The firm added that its proximity to the Marcellus shale gas play makes it well positioned to access competitively priced natural gas in a market that is currently transitioning away from coal-fired power generation to gas.
The Ironwood acquisition will immediately add to earnings and cash flow and generate about US$90 to $110 million in earnings a year before interest, taxes, depreciation and amortization, TransCanada said.
“The Ironwood power plant will be very complementary to our U.S. northeast operations, which now total over 4,500 MW, and is consistent with our disciplined approach to growth in this important region where we have been operating on the power side since 1998,” added William Taylor, TransCanada’s executive vice-president and president, Energy.
It will fund the acquisition with a combination of cash on hand and available credit. That deal is expected to be wrapped up in the first quarter of 2016.
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