Power producer Vistra Energy can be close to a deal to buy fellow Texas merchant generator Dynegy, the Wall Street Journal reported on Wednesday.
Shares of Dynegy jumped to close up about 17 percent at $10.78. Vistra Energy ended trading at $20.32, up 3.8 percent.
Talks to combine the two energy companies, reportedly from the works since May, could lead to a deal being officially announced as soon as next week, according to the Journal. This kind of might mark further consolidation among independent power producers, the companies in which generate electric power along with sell This kind of into wholesale markets.
The two companies’ combined enterprise value, a more comprehensive measure of total value than market capitalization, might value the merger at more than $20 billion, the Journal reported.
Neither company immediately responded to CNBC’s request for comment.
The purchase might help Vistra expand into the Midwest along with Northeast, where Dynegy operates many natural gas along with coal-fired plants.
In addition to generating power, Dynegy along with Vistra both play from the retail electricity space, which sells power to residences along with businesses. in which business typically does well when power prices are low, like they are today. The power generation side usually suffers when prices are soft.
Independent power producers have struggled to find a winning business design since a wave of deregulation from the early 2000s. The goal of deregulation was to promote competition from the utility sector along with drive down power costs, yet sea modifications from the space have created challenges for merchant generators.
The unexpected boom in U.S. natural gas production over the last decade has pushed down power prices, producing This kind of harder for companies in which operate plants to turn a profit. At the same time, subsidies along with some other support for renewable energy projects have boosted competition via wind along with solar power along with piled pressure on coal-fired along with nuclear power plants.
The industry has been plagued by bankruptcies. Dynegy entered Chapter 11 bankruptcy in 2011, along with Vistra itself was spun out of the bankruptcy of Energy Future Holdings, one of the largest in history.
The deal potentially takes a chess piece off the table for NRG Energy, the power producer in which announced a transformation plan earlier This kind of year under the guidance of billionaire hedge-fund manager Paul Singer along with fellow activist investor Charles John Wilder.
Analysts told CNBC earlier This kind of year in which purchasing Dynegy might allow NRG to pick up a large portfolio of combined cycle plants, the most efficient type of natural gas facilities.