Equinor buys 87.71% stake in Lackawanna gas plant for $940 million

Equinor has agreed to buy 87.71% of the Class A shares in Lackawanna Energy Center, a 1,483 MW gas-fired combined cycle power plant in Pennsylvania, for $940 million, subject to a potential price reduction at closing.

Equinor is buying the stake from funds managed by Global Infrastructure Partners (GIP), part of BlackRock. The remaining Class A shares and all of the Class B shares stay with Invenergy AMPCI Thermal Power LLC. Invenergy, which developed the plant and describes itself as North America's largest privately held developer, owner and operator of power infrastructure, will keep managing and operating Lackawanna after the deal closes, while Equinor and Invenergy plan to explore further collaboration in the PJM market.

The asset

Lackawanna began commercial operations in January 2019, when it was Pennsylvania's second largest gas plant. It runs three combined cycle units, each with a gas turbine, a steam turbine, a generator and a heat recovery system. Equinor said the plant generates close to 9 TWh of net electricity a year, at an average heat rate of 6,375 Btu/kWh.

The plant sits in the PJM market, the largest wholesale electricity market in the US, which serves nearly 70 million consumers across 13 states and is expected to see continued demand growth.

Appalachian tie-in

Lackawanna sits near Equinor's non-operated gas position in the Appalachian Basin, one of the company's largest gas assets globally, which delivers more than 1.7 billion cubic feet of natural gas a day into the northeastern US. Equinor said the plant has reliable access to abundant, competitively priced natural gas.

Helge Haugane, Equinor's executive vice president for Power, said the deal gives the company "further access to the largest power market in the US" and that it "also provides early cash flow and long-term value potential."

Deal structure

Equinor said the investment structure gives it upfront preferred cash flow and visibility into long-term cash generation, backed by investor protection mechanisms; the Class A shares carry preferential dividend rights. The deal builds on Equinor's position in the United States, the company's largest source of energy production outside Norway, and fits its approach of building power positions in select markets. Closing is subject to customary regulatory approvals.