PPL Montana part of spinoff into new company – what now for Colstrip?

2014-06-10T08:15:00Z 2014-06-11T09:14:04Z PPL Montana part of spinoff into new company – what now for Colstrip?By MIKE DENNISON Gazette State Bureau The Billings Gazette

HELENA — PPL Montana, the state’s largest private power generator, is being spun off to a new company that will own independent power projects around the country, its parent firm announced Tuesday.

PPL Corp. of Allentown, Pa., which bought the old Montana Power Co. hydroelectric and coal-fired power plants in 1999, said it will transfer what’s left of PPL Montana next year to a newly formed company called Talen Energy Corp.

Talen Energy will own a 15,000-megawatt portfolio of plants now controlled by PPL, including its share of the Montana coal-fired power plants at Colstrip, and Riverstone Holdings, a New York-based investment and energy firm.

PPL Montana still plans to sell its 12 hydroelectric and storage dams here to NorthWestern Energy for $900 million and mothball its coal-fired Corette plant in Billings next year, a PPL spokesman said.

George Lewis, a spokesman for PPL Corp. in Allentown, said the company thought it better to separate its independent power plant holdings from its utility operations, the latter of which are generating most of the company’s profits.

Wholesale power prices are at historic lows, reducing the profits of merchant power plants and making regulated utilities a more reliable income producer.

Creating a new, stand-alone company owning independent power plants will make it easier for that company to focus on the challenges they face in the current market, Lewis said.

“The investors in the financial community can look at that generation company on its own,” he said. “Both companies (PPL Corp. and Talen) can do what they do best.

“Merchant generators can look at growth and investment, either in plant upgrades or new plants. Those (opportunities) were limited in the structure that we have now.”

PPL Corp. stockholders will control 65 percent of Talen Energy and Riverstone will own the remaining share.

PPL Montana employs about 520 people in Montana, including 370 workers in Colstrip, where the company operates four coal-fired power plants, and another 150 at the Corette plant, the hydroelectric dams and marketing and management offices in Billings and Butte.

PPL Corp. said combining the power plant holdings of Riverstone and PPL into one company will eliminate some jobs at plant locations and “corporate support services,” but Lewis said it’s too early to know whether any workforce cuts will occur in Montana.

Lewis and other company officials said the transaction, scheduled to be completed by the summer of 2015, shouldn’t cause much change at power plant operations in Montana.

Nonetheless, the program director for the Montana Environmental Information Center, a staunch critic of coal-fired power, predicted Tuesday that the transaction bodes ill for the future of the Colstrip plants.

A new, national firm whose assets are primarily in the East and Texas may be unwilling to make investments needed to keep the Colstrip plants up to date in a changing regulatory environment, said Anne Hedges, of the MEIC.

David Schlissel, a Boston-based energy consultant with a think tank that wants to reduce the nation’s reliance on coal-fired power, also said coal power is facing market pressure from cheaper alternatives, and the decision on Colstrip will come down to whether its new owners think it can earn them a profit.

“Given the uncertainty, the state of Montana should be planning for a transition to life without Colstrip, perhaps, certainly (plants) 1 and 2,” he said.

Lewis, however, said PPL and the other Colstrip power plant owners still consider them “an efficient, low-cost provider of electricity for all of its owners.”

“It provides for PPL Montana and Talen Energy a good source of electricity that we can sell in the wholesale market that still exists in Montana,” he said.

PPL owns half of the power output at Colstrip 1 and 2 and 30 percent of Colstrip 3. The other owners of the power produced at the Colstrip plants are NorthWestern Energy, Puget Sound Energy of Bellevue, Wash., Portland (Ore.) General Electric, Avista of Spokane, Wash., and PacifiCorp of Portland, Ore.

The amount of Colstrip power owned by PPL Montana — 530 megawatts — represents a mere fraction of the 15,000-megawatt portfolio that will make up Talen Energy’s power plant holdings. The power plants are primarily in Pennsylvania, Maryland, New Jersey, Massachusetts and Texas.

Talen will receive plants with about 10,000 megawatts of capacity from PPL Corp. and 5,000 megawatts of capacity from Riverstone. The portfolio is about 40 percent coal power, 40 percent natural gas power and 15 percent nuclear power.

A co-founder of Riverstone is David Leuschen, the son of former Montana Power Co. president Don Leuschen, who died in Bozeman two years ago. The younger Leuschen was born in Lewistown, earned a master’s in business administration from Dartmouth College in New Hampshire and worked at Goldman Sachs in New York before co-founding Riverstone.

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