Ameren Corporation announced plans Thursday morning to sell its power generating business, Ameren Energy Resources (AER), to Houston-based Dynegy.
The transaction includes Coffeen Power Station, and employees there also found out about the sale Thursday morning.
Dynegy will take over the power plants with no outlay. A newly-formed subsidiary, to be called Illinois Power Holdings, will operate the plants and take over some $825 million in debt.
Ameren claims a $900 million benefit from the transaction by removing that debt from its balance sheet and adding $180 million in tax benefits to be realized in 2015. Those are offset by some $75 million in pension obligations and other liabilities that Ameren will maintain.
As terms of the agreement, the new company will honor existing labor contracts, as well as coal and rail contracts, for up to 24 months.
"Ameren no longer considers merchant generation as a core component of our business strategy," Thomas R. Voss, chairman, president and CEO of Ameren Corporation said during a conference call Thursday morning. The company expects to close the deal during the fourth quarter of 2013.
Ameren will keep three natural gas-fire energy generating facilities–Elgin, Gibson City and Grand Tower–and put them up for sale "as soon as reasonably practical," according to Voss. Later in the conference call, Ameren officials predicted that to occur by the end of the year. The company will also retain two power plants in Meredosia and Hutsonville that were recently shut down.
The sale will allow Ameren to focus exclusively on its rate-regulated electric, natural gas and transmission operations. The company announced plans for an $8.1 billion infrastructure investment from 2013 to 2017, largely in delivery and transmission in Illinois and Missouri. Ameren also forecast a seven percent growth over those five years.
The transaction is subject to regulatory approvals, including from the Federal Energy Regulatory Commission (FERC) and the Illinois Pollution Control Board.