Equinor will expand its presence in the U.S. electricity market by purchasing an 87.71% stake in the Lackawanna Energy Center, a natural gas-fired combined cycle power plant located in Pennsylvania.
The Norwegian company agreed to pay $940 million for the asset’s Class A shares, although the amount could be reduced at the time of closing. The transaction will allow Equinor to incorporate a generation capacity of 1,483 MW within the PJM electricity market.
Equinor bets on a 1,483 MW gas plant
Lackawanna Energy Center began commercial operations in 2019 and is among the large gas-fired power plants operating within PJM. The facility has three combined cycle units that integrate gas turbines, steam turbines, generators, and heat recovery systems.
Additionally, the plant generates nearly 9 TWh of electricity per year and records an average heat rate of 6,375 Btu/kWh.
Invenergy developed Lackawanna and will continue to manage and operate the facilities following Equinor’s entry. Both companies will also explore new collaboration possibilities within the PJM energy market.
For its part, Equinor will acquire the stake from funds managed by Global Infrastructure Partners (GIP), a BlackRock company. Invenergy AMPCI Thermal Power LLC will retain the remaining Class A shares and all Class B shares.
PJM concentrates growing electricity demand
Currently, PJM constitutes the largest wholesale electricity market in the United States and supplies power to nearly 70 million consumers across 13 states.
In this market, the growth of data centers, electrification, and industrial activity is increasing power generation needs.
Electricity demand in PJM is growing rapidly, driven by electrification, data centers, and industrial activity.
Stated Helge Haugane, Executive Vice President of Energy at Equinor.
According to the executive, the operation provides the company with greater access to the main U.S. electricity market and brings cash flow from an early stage along with long-term value creation potential.
The Lackawanna plant connects electricity and natural gas
In addition to expanding its power generation business, Lackawanna’s location allows Equinor to link this asset with its natural gas position in the Appalachian Basin.
The company maintains one of its largest gas assets worldwide there. This position, which Equinor does not operate directly, supplies more than 1.7 billion cubic feet of natural gas daily to the Northeast United States.
Likewise, Lackawanna’s access to abundant and competitive natural gas supplies strengthens its position within PJM. The proximity between power generation and gas production fits Equinor’s goal of developing a more integrated energy business in selected markets.
Equinor consolidates its presence in the United States
The operation expands a U.S. presence that holds considerable weight within Equinor’s international portfolio. The United States currently represents its main source of energy production outside of Norway.
With Lackawanna, the company incorporates an already operational power generation asset while maintaining its exposure to the Appalachian gas business. The investment structure also includes initial preferential cash flow and mechanisms designed to provide greater visibility on future returns.
The closing of the acquisition is still subject to customary regulatory approvals. Once completed, Equinor will strengthen its participation in an electricity market where the expansion of data centers, industry, and electrification is raising supply needs.
Source and photo: Equinor
