(Adds details, context, background)
Sept 7 Goldman Sachs Group Inc will sell
its power plant development unit to Carlyle Group in the
latest of a string of deals by the private equity firm since the
break-up of its energy investment venture with Riverstone
The deal to buy Charlotte, North Carolina-based Cogentrix
Energy LLC will give Carlyle access to three coal-fired and two
solar power plants, and a development pipeline with over 550
megawatts (MW) of operational capacity.
The terms of the deal, expected to close in the fourth
quarter, were not disclosed.
Goldman Sachs, which bought Cogentrix in 2003 for $115
million and assumed $2.3 billion of debt, will retain a minority
stake in one of the power plants. The decision to divest it now
was purely commercial, a bank spokesman said.
"After nearly 10 years of ownership, we decided the best way
to maximize the remaining value of the assets and to preserve
the platform was through a sales process," he said.
But the sale, carried out through a months-long auction this
year, also comes at a time when major Wall Street banks are
engaged in a high-stakes debate with the Federal Reserve over
whether they should be allowed to continue to own and operate
major pieces of energy and commodity market infrastructure.
Under existing rules, regulated banks are barred from buying
and operating physical assets, although many have been permitted
to engage in active trading of physical commodities. Owning the
infrastructure can often boost trading profits.
But a previous amendment to banking regulations offered an
apparent exemption that would apply to banks that later
converted to regulated holding companies, as Goldman and Morgan
Stanley did in 2008. The Federal Reserve gave Morgan
Stanley, which also owns power generation assets, up to five
years from that date to comply with rules.
Even after the sale, Goldman will have sizeable commodity
sector investment. It shows no signs of moving to sell U.S.
metals warehousing firm Metro International, which it bought in
2010, and earlier this year, it paid more than $400 million to
buy Colombian coal mine assets from Brazil's Vale.
CARLYLE GOES BIGGER
The acquisition of Cogentrix is Carlyle's second in the
energy sector in as many months. In July it struck a deal with
Sunoco Inc to save and expand the largest U.S. East
Coast refinery based in Philadelphia to capitalize on the
nation's shale boom. [ID: nL2E8I20OS]
Carlyle, the world's No. 2 alternative asset manager, will
use Cogentrix team's expertise for future investment in the
power sector and to acquire and develop conventional and
renewable power projects across the United States, Carlyle
Chairman Daniel D'Aniello said in a statement.
Cogentrix, started in 1983, has developed electric power
generating and co-generating facilities throughout the United
States with a combined generating capability of over 5,000 MW of
In an effort to peg a value on the deal, power traders said
they were looking at Exelon's sale last month of three
coal-fired power plants in Maryland for $400 million. With a
total capacity of 2,648 MW, the deal came out to an average of
around $150,000 per megawatt.
At that rate, the Cogentrix deal would come to some $82.5
million, although it may have commanded a premium to that rate
since some of the Cogentrix plants were newer than Exelon's and
included some solar power facilities.
Vinson & Elkins was legal adviser to Carlyle on the
(Reporting by Thyagaraju Adinarayan, Sunayan Bhattacharjee and
Jochelle Mendonca in Bangalore, additional reporting by Scott
diSavino and Jonathan Leff in New York; Editing by Saumyadeb
Chakrabarty and Bernadette Baum)