Dive Brief:
- Macquarie Infrastructure Corp. announced over the weekend that it has reached an agreement to sell its 644-MW gas-fired Bayonne Energy Center (BEC) in New Jersey for $900 million, in an effort to shore up its balance sheet.
- Macquarie has not owned the power plant for long; it was constructed in 2012 by Hess and ArcLight Capital Partners and Macquarie purchased it in 2015.
- The plant was expanded in 2018, a 120 MW uprate that was identified by the New York ISO as a resource to help replace Entergy's Indian Point nuclear facility when it shuts down in 2020 and 2021.
Dive Insight:
With new capacity installed at the plant and New York in need of its energy, Macquarie believes now is the time to sell the Bayonne, N.J., plant. The gas plant supplies New York City via a cable that runs beneath New York Harbor, to a substation in Brooklyn.
Macquarie purchased the plant for a total enterprise value of $720 million just three years ago, illustrating the growing value of gas-fired generation in some markets.
Macquarie informed the U.S. Securities and Exchange Commission of the deal last week in a Form 8-K, identifying the buyer as NHIP II Bayonne Holdings LLC. The company will purchase 100% of Thermal Bayonne Holdings LLC for approximately $656.5 million in cash and the assumption of approximately $243.5 million in debt.
The purchase price is subject to adjustment based on working capital and debt balances at the effective date. Macquarie said the transaction values Bayonne at approximately $1,400/kW of generating capacity.
Officials at Macquarie said the time was right to sell the plant following the expansion and given the opportunity to make balance sheet improvements.
Macquarie said it expects to use some of the net proceeds of approximately $650 million, after transaction fees and expenses, to reduce the company's debt. That would include $150 million outstanding on the revolving credit facility at Macquarie's International-Matex Tank Terminals business, which owns a dozen bulk liquid storage terminal facilities.
"Having completed various capacity and capability expansion projects at BEC, we concluded that this was an appropriate time to sell the facility and redeploy the proceeds to address strategic priorities including strengthening our balance sheet," Macquarie CEO Christopher Frost said in a statement.
Proceeds from the Bayonne sale that are not used to reduce debt will be available to "fund a portion of MIC’s planned growth capital deployments," the company added. The Macquarie board will also consider "options for returning any excess capital to shareholders."
