Stonepeak Infrastructure Partners’ $390.3 Million Acquisition of GenOn’s Canal Units 1 and 2

Credit Suisse Securities (USA) LLC is acting as exclusive financial advisor to GenOn related to the sale of the Canal Facilities. Kirkland & Ellis LLP serves as legal counsel and Rothschild & Co. as financial advisor to GenOn. Ducera Partners LLC (and affiliates) and Davis Polk & Wardwell LLP serve as advisors to the ad hoc group of GenOn noteholders. Quinn Emanuel Urquhart & Sullivan, LLP and Ducera Partners LLC (and affiliates) serve as advisors to the ad hoc group of GenOn Americas Generation noteholders.

GenOn Energy, Inc. entered into a Purchase and Sale Agreement with Stonepeak Kestrel Holdings LLC, a subsidiary of Stonepeak Infrastructure Partners, pursuant to which Buyer agreed to purchase all of the right, title and interest in Canal Units 1 and 2, electricity generating facilities with a combined summer capacity rating of approximately 1,112 megawatts. GenOn’s affiliates entered into the Purchase Agreement with the support of a majority of its noteholders. Total proceeds are expected to be approximately $390.3 million, inclusive of the expected closing purchase price of $320 million, estimated working capital (including target fuel inventory) of $32.5 million, an anticipated refund of $13.5 million from NRG in respect of the Canal 3 Option (defined below), and an estimated $24.3 million of post-closing excess fuel inventory payments. The closing purchase price is subject to adjustment for the net working capital of the business calculated as of the closing date (including a downward adjustment for distributions or dividends made after June 30, 2018) and upward adjustment of $13.5 million if the Canal 3 transaction does not close due to a debt financing failure at Canal 3. Subject to the satisfaction of closing conditions described in the Purchase Agreement, the transaction is expected to close early in the third quarter of 2018.

GenOn, a wholly owned subsidiary of NRG Energy, Inc. (NYSE: NRG), previously entered into a Cooperation Agreement with NRG, whereby GenOn obtained both a rejection option through January 22, 2018 and a purchase option through March 31, 2018 (the “Canal 3 Option”) for NRG’s Canal 3 power generation facility (“Canal 3”). On March 22, 2018, GenOn entered into an amendment to its Cooperation Agreement with NRG providing for, among other terms: (i) direct negotiation by NRG with a third-party purchaser of Canal 3, (ii) a refund from NRG of $13.5 million of GenOn’s prepayment of the Canal 3 Option upon the closing of a third-party sale of Canal 3, and (iii) a refund from NRG of the entire $15.0 million of GenOn’s prepayment of the Canal 3 Option in the event of a termination of the sale of the Canal Facilities resulting from a breach by NRG of the purchase agreement for a third-party sale of Canal 3. Concurrently with the execution of the Purchase Agreement, an affiliate of Buyer and NRG entered into a Purchase and Sale Agreement pursuant to which an affiliate of Buyer agreed to purchase Canal 3 directly from an affiliate of NRG. GenOn elected to allow the rejection option to expire unexercised and has agreed with Buyer to not exercise the Canal 3 Option.

Kirkland advised GenOn Energy, Inc. with a team includingcorporate partners Kim Hicks (Picture), Andrew Calder, Shubi Arora, Brandon Bishoff and Jenna McCord.

Involved fees earner: Kim Hicks – Kirkland & Ellis; Andrew Calder – Kirkland & Ellis; Brandon Bishoff – Kirkland & Ellis; Shubi Arora – Kirkland & Ellis; Jenna McCord – Kirkland & Ellis;

Law Firms: Kirkland & Ellis;

Clients: GenOn Energy, Inc.;


Author: Ambrogio Visconti