Tenaska, Warburg Flip Power Plants

Target: APT Generation, Calumet Energy Power Station

Price: $856.4 million

Sponsor: International Power plc

Seller: Tenaska Capital Management (APT and Calumet), Warburg Pincus (APT)

Financial Adviser: Seller: JPMorgan

Legal Adviser: Undisclosed

Tenaska Capital Management LLC and Warburg Pincus appear poised to pocket a healthy return upon selling a package of four power plants, three of which the firms jointly owned for barely a year.

The buyout firms agreed to sell APT Generation, a trio of electric generating plants in Pennsylvania, West Virginia and Ohio that they bought in March 2007, for a reported $256 million to Dominion Resources Inc. To make the deal more attractive, Tenaska added Calumet Energy Power Station, a 303-megawatt power plant in Chicago it had bought in 2005 for $38 million.

Tenaska Capital and Warburg Pincus began talking about selling APT Generation in the first quarter after Tenaska Capital successfully sold another power plant late last year, said Dan Lonergan, a Tenaska Capital managing director. In December 2007, JPMorgan brokered the sale of Commonwealth Chesapeake Company LLC, the operator of a Virginia power station Tenaska Capital acquired in 2005.

Lonergan declined to discuss his firm’s exit multiple on the sale of the four power plants, which is expected to close in the third quarter. But he said the main motivation for the sale was that Tenaska Capital expected it to meet the firm’s investment return objectives. A Warburg Pincus spokesperson declined to comment.

Power plants have been a frequent target of deals in recent months, led by the landmark $45 billion takeover by TPG and Kohlberg Kravis Roberts & Co. in October of TXU Corp., now known as Energy Future Holdings. Last month, energy group Black Hills Corp. agreed to sell for $840 million seven independent gas-powered plants to Hastings Funds Management Ltd. of Australia and IIF BH Investment LLC, a subsidiary of an investment entity advised by J.P. Morgan Asset Management. And in January, Atlanta-based investment firm Arcapita teamed up with Fulcrum Power Services to acquire the Bosque power generation facility from LS Power Group.

Tenaska Capital, the buyout arm of the Omaha, Neb.-based energy company, made its investments in the plants out of Tenaska Power Fund LP, its debut $840 million fund, that closed in 2003 and is fully invested. The firm is raising a follow-up fund targeting $1.5 billion, with a $2.3 billion hard cap, as previously reported in Buyouts.

The APT Generation plants consist of Armstrong Energy plant, a 635-megawatt plant in Armstrong County, Pa.; Pleasants Energy, a 313-megawatt plant in Pleasants County, W.Va; and Troy Energy, a 616-megawatt plant in Wood County, Ohio.—B.V.