(Reuters) - U.S. electric power company Dynegy Inc (N:DYN) said it had partnered with private equity firm Energy Capital Partners to buy French utility Engie SA's (PA:ENGIE) U.S. power plants worth $3.3 billion to expand in regulated power markets.
Falling demand for electricity in the United States due to increased energy efficiency has led to a spate of mergers as utilities look to cut their exposure to unregulated markets, where prices are volatile.
The deal will give Dynegy presence in the Texas market, which is currently controlled by grid operator Electric Reliability Council of Texas (ERCOT).
Houston-based Dynegy said the acquisition would also boost its presence in New England, managed by grid operator ISO New England, and in the mid-Atlantic and parts of the Midwest, run by PJM Interconnection.
Dynegy, which will own 65 percent of the joint venture, said the acquisition would add about 8,731 megawatts (MW) to its generation capacity, taking the total to 35,000 MW across PJM, ISO New England, ERCOT and other regulated power markets.
Dynegy will invest about $770 million and Energy Capital will invest about $415 million in the joint venture, expected to generate about $90 million in annual synergies.
The partnership has secured financing with $2.25 billion in committed debt facilities and $1.19 billion in equity commitments, Dynegy said on Thursday.
Energy Capital will also buy $150 million of Dynegy stock at $10.94 per share, which will raise its holding in the company to about 15 percent.
Dynegy's shares closed at $8.32 on the New York Stock Exchange on Wednesday.
Energy Capital, which focuses on North America's energy infrastructure, will receive one board seat in Dynegy as long as it holds more than 10 percent common stock of the company.
Energy Capital will have the right to exit the joint venture four years after the deal closes, either through a sale of its interest to Dynegy or a sale of the entire joint venture.
Up to Wednesday's close, Dynegy's shares had fallen nearly 72 percent in the past 12 months.