This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Dynegy To Acquire Ameren Energy Resources, Expanding Illinois Portfolio

Stocks in this article: AEE DYN

Dynegy Inc. (NYSE:DYN) and Ameren (NYSE:AEE) announced today they have signed a definitive agreement under which Dynegy’s subsidiary Illinois Power Holdings, LLC (IPH) will acquire Ameren’s subsidiary, Ameren Energy Resources (AER) and its subsidiaries Ameren Energy Generating Company (Genco), AmerenEnergy Resources Generating Company (AERG), and Ameren Energy Marketing Company (AEM). Upon closing, Dynegy will own more than 8,000 megawatts (MW) of generating capacity in Illinois, and nearly 14,000 MW nationally. The AER retail and marketing businesses and the following plants are included in the transaction: Duck Creek, Coffeen, E.D. Edwards, Newton, and Joppa.

“The acquisition of AER is expected to create significant value for Dynegy shareholders by building upon our existing scale in one of our key markets with assets similar to our Illinois-based CoalCo portfolio. We are uniquely positioned to create significant synergies that will benefit AER and our CoalCo and GasCo businesses. AEM also brings to Dynegy an established retail business with significant scale that complements both portfolios,” said Robert C. Flexon, Dynegy President and Chief Executive Officer. “Additionally, the financial terms of the acquisition and the transaction structure ensure that very limited capital support, if any, will be needed or provided by the Company to AER thereby preserving Dynegy’s capital allocation flexibility.”

Transaction Structure

Dynegy will acquire AER and its subsidiaries through a wholly-owned special purpose entity – IPH – that will maintain corporate separateness from current Dynegy entities. Obligations under the signed Transaction Agreement (TA) include:


  • Prior to closing, Ameren, or its designated subsidiary, will purchase Genco’s Elgin, Grand Tower and Gibson City natural gas-fired generation plants for a guaranteed minimum price of $133 million. Appraisals will be obtained for these plants prior to settlement, and if the average value of the appraisals exceeds $133 million, any excess amount will be remitted to Genco. If Ameren subsequently sells these plants within two years of closing, all after-tax proceeds in excess of the $133 million, or the higher appraised value if applicable, will be remitted to Genco.
  • In addition to the gas plant sale proceeds, Ameren will ensure a minimum of $93 million of cash at AER and its subsidiaries of which approximately $70 million will be held at Genco.
  • For 24 months following closing, Ameren is to provide post-closing credit support to IPH for its existing commercial obligations. IPH’s reimbursement obligation for that support would be secured by a lien on certain IPH assets.
  • AER will have consolidated net working capital at closing, excluding cash, of $160 million.
  • Post closing, Ameren will offer transition support services to IPH, as needed, and billable to IPH for services provided in excess of $5 million.


  • Dynegy has provided a $25 million guarantee to Ameren at TA signing of certain IPH obligations under the TA for a period of 24 months beyond the transaction closing.


  • IPH will assume existing business and on-site environmental obligations of the five acquired plants but will not assume any potential liabilities associated with previously owned facilities and the Duck Creek rail embankment.
  • IPH will indemnify Ameren for up to $25 million for certain offsite liabilities associated with the beneficial reuse and disposal of coal combustion residuals from the acquired operating sites.

Transaction Benefits

AER’s coal generation and retail marketing business is a natural fit with CoalCo, Dynegy’s existing coal generation fleet. Both portfolios are compliant with the EPA’s Mercury and Air Toxic Standards which goes into effect during 2015. As other noncompliant or uneconomic generation continues to retire, the combined portfolio will be well positioned to benefit from tightening supply dynamics. Transaction benefits include:

  • The transaction more than doubles Dynegy’s exposure to market recovery and Midwest coal plant retirements.
  • AER has recently obtained additional transmission rights which, when confirmed by AER, will increase the total available transmission capacity from their Illinois assets into PJM to approximately 900 MW. These rights will be available for the 2016/2017 PJM capacity auction.
  • AER and its subsidiaries will have sufficient liquidity and collateral support at closing to meet expected operating obligations.
  • Operational synergies are expected to exceed $60 million per year by 2015. Cost synergies, such as lower delivered fuel cost and other procurement opportunities, result from the combined portfolio’s increased scale in Illinois. Other savings, such as reductions in operating and general and administrative expenses, result from the similar asset profile of CoalCo and by leveraging Dynegy’s existing infrastructure. As part of the integration, Dynegy will expand its highly successful PRIDE (Producing Results through Innovation by Dynegy Employees) program to AER’s business.
  • Dynegy’s existing business is also anticipated to benefit through lower allocation of existing infrastructure costs across the broader asset base.
  • AEM has established marketing and retail businesses which provide 15 million megawatt-hours of electricity annually to municipals, co-ops, and commercial and industrial customers in MISO and PJM. The Homefield Energy retail brand, which serves nearly 500,000 homes and small businesses in Illinois, is included in this total. Dynegy’s PJM-based generation facilities will provide support for growth in that market. These businesses will also provide basis management opportunities for the entire coal fleet.

The targeted synergies, along with the current forward market for natural gas prices and Dynegy’s associated view on forward power and capacity prices, are expected to result in AER being accretive to Dynegy’s Adjusted EBITDA in 2014 and to Free Cash Flow by 2015. In addition, these same forward curves indicate that all three of AER’s subsidiaries offer substantial equity value creation for the benefit of Dynegy’s shareholders.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs