Skip to main content

Dynegy Selling Natural Gas Unit

The buyer in the $2.5 billion deal is a unit of Warburg Pincus.
  • Author:
  • Publish date:



agreed to sell its natural gas business for $2.48 billion to private equity buyers led by Warburg Pincus.

Houston-based Dynegy said Warburg's Targa Resources will take over Dynegy Midstream Services LP, which holds Dynegy's natural gas gathering and processing assets, as well as its natural gas liquids fractionation, storage, transportation, distribution and marketing assets.

Dynegy expects to get $2.35 billion in cash at closing, plus a return of cash collateral of $125 million and the elimination of responsibility for $75 million in letters of credit for the Midstream business within 60 days. Dynegy said taxable gains from the transaction will be largely offset by net operating losses, capital loss carryforwards and tax credits related to Dynegy's recent restructuring, minimizing cash taxes associated with the Midstream transaction.

Scroll to Continue

TheStreet Recommends

The sides expect to close the sale in the fourth quarter.

"As a result of Dynegy's unique tax position, the proceeds from the Midstream transaction will be substantially retained for our shareholders," said Dynegy CEO Bruce A. Williamson. "We believe the benefits of the transaction will also provide us with opportunities to evaluate new strategic directions for our Power Generation business. We will consider organic growth, growth through opportunistic expansion or participation in the anticipated power sector consolidation as we continue our focus on delivering value to our investors.

The Midstream organization will continue to be headquartered in downtown Houston. Dynegy's existing Midstream workforce of nearly 800 field and corporate employees will join Targa, which is led by Chief Executive Officer Rene Joyce.

In connection with the transaction, Dynegy's Stephen A. Furbacher will retire after more than 30 years with Dynegy and its predecessor companies. He will serve as a consultant to Targa during a transition period after the closing of the transaction.

Targa currently has Midstream operations in West Texas and Southwest Louisiana, operating more than 2,000 miles of pipeline, five gas plants with 400 million cubic feet of natural gas per day of capacity, and system throughput of about 370 million cubic feet of natural gas per day. Additionally, Targa owns 40% of the Bridgeline pipeline system in Southern Louisiana.

On Tuesday, Dynegy shares rose a dime to $5.63.