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PG&E to sell interest in generation subsidiary to fund wildfire mitigation, electrification

PG&E to sell interest in generation subsidiary to fund wildfire mitigation, electrification

PG&E Corporation announced that it has entered into exclusive negotiations to sell a minority interest in Pacific Generation, its generation subsidiary, to KKR’s Infrastructure Strategy.

As previously announced in September 2022, PG&E is seeking approval to transfer its non-nuclear power generation assets to a newly formed subsidiary, Pacific Generation, and to transfer a minority ownership of the subsidiary. These transactions are still subject to approval by the California Public Utilities Commission (CPUC) and Federal Energy Regulatory Commission (FERC), as well as other closing conditions.

PG&E said potential benefits of the investment would include:

  • Reduction in customer rates by more than $100 million over the next 20 years, as Pacific Generation should have higher credit ratings and a lower cost of debt compared to PG&E
  • Capital to invest in wildfire prevention, safety and the generation fleet
  • Additional capital to invest in California’s decarbonization and electrification goals

Under the proposed transaction, PG&E would remain the majority owner of Pacific Generation and the current workforce would continue to operate and maintain the generation facilities. Additionally, PG&E said the proposed transaction would not impact the regulation of Pacific Generation’s assets, which would continue to be overseen by the CPUC and FERC. 

“After thoroughly evaluating a full range of potential investors, we believe that a strategic partnership with KKR would be highly beneficial to our customers by supporting investment in generation and storage assets that are critical contributors to clean, reliable energy, and providing a path to lower rates,” said Carolyn Burke, executive vice president and chief financial officer at PG&E. “With a strong strategic partner like KKR, we would be better-positioned to help support cleaner energy generation, such as hydro and pumped storage, as well as other energy storage assets needed to balance California’s portfolio of intermittent renewable resources and mitigate wholesale market volatility.” 

KKR’s Global Infrastructure business was formed in 2008 and has $59 billion in assets under management, and PG&E said the firm’s access to capital affords it the ability to take a long-term “buy and build” view on asset management.

PG&E Co., a subsidiary of PG&E Corporation, owns and operates one of the largest investor-owned hydroelectric system in the U.S., built along 16 river basins that stretch nearly 500 miles. The system uses water from more than 100 reservoirs and features 67 powerhouses with a total capacity of about 3,900 MW.

This article was originally published on Power-Grid International.