In May, Hess Corp. (NYSE: HES) said it was all but done with its transformation into a pure E&P.
John B. Hess, CEO, said the sale of the company’s retail business in May for $2.6 billion “marks the culmination of our strategic transformation into a pure-play exploration and production company.”
But after the party, there’s always mopping up left to do. On June 20, Energy Investors Funds (EIF), an energy-focused private equity firm, announced June 20 that two of its managed funds indirectly acquired an additional 50% ownership stake in the Newark Energy Center from Hess.
In April, Hess signed an agreement to sell its 50% interest in a joint venture to construct an electric generating facility in Newark, N.J. for about $330 million. The gain on sale was expected to be limited, said Paul Y. Cheng, an analyst for Barclays Capital.
EIF said it would use a $590 million loan to support the acquisition, construction and operation of the 705-megawatt, natural gas fired power plant, which is being built using GE’s advanced combined-cycle, natural gas-fired turbine technology.
In November 2012, Hess signed an agreement with EIF-NEC LLC, a subsidiary of private equity funds managed by EIF, to develop the Newark Energy Center on land adjacent to Hess’ petroleum storage terminal.
With the deal, EIF-NEC now holds 100% of the equity interests in the Newark Energy Center. Three lenders served as co-lead arrangers and joint-book runners. Financial details of the transactions were not disclosed by EIF.
The Newark Energy Center is being built on 23 acres of brownfield industrial land in New Jersey, a location with nearby gas supply and an electrical interconnection point.
The project has been under construction for nearly two years and is expected to begin commercial operations in May 2015. It will sell its energy and capacity into the PJM capacity market. Power Plant Management Services is managing construction, with NAES Corp. providing operations and maintenance and Direct Energy undertaking additional energy management services.
“We’re excited to consolidate our ownership of the Newark Energy Center and are pleased to work with three longtime relationship banks on the financing of such a critical new generation resource,” said Keith Derman, a partner at EIF. “This project will provide the PJM market with a reliable new source of efficient and environmentally friendly capacity.”
Crédit Agricole Corporate and Investment Bank, GE unit (NYSE: GE) GE Energy Financial Services and Mitsubishi UFJ Financial Group (MUFG) financed EIF’s deal.
Hess’ recent sale of its retail business prompted the company to increase its share repurchase program to $6.5 billion from $4 billion, which is consistent with prior commitments following the disposition of the retail operations.
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