In response to an October lawsuit from an affiliate of Talen Energy of Allentown and plaintiffs seeking $733 million from PPL Corp. of Allentown, PPL Corp. has filed a suit of its own that claims any shortage of money was due to those companies’ own mismanagement.
Friday, PPL Corp. filed a complaint in the Delaware Court of Chancery against Talen Energy Corp. and certain Talen affiliates, including Riverstone Holdings LLC, its private equity owner, seeking damages and relief from claims made by Talen in Montana state court. Talen’s claims arise out of the spinoff of PPL Energy Supply in June 2015.
In October, a class-action suit was filed by the Talen Montana Retirement Plan and other plaintiffs claiming that PPL and its directors improperly transferred $733 million in proceeds from the sale of its Montana hydroelectric assets, leaving Talen Montana without adequate funds to pay its obligations for environmental cleanup and pensions on its own.
In a separate lawsuit, Talen Montana alleged that PPL and certain of its directors breached their fiduciary duties by causing PPL Montana to pay an improper $733 million dividend to PPL in November 2014, the amount of the net proceeds PPL received from the sale of its Montana hydroelectric asset.
Talen Energy, which became an independent, publicly traded company in June 2015, includes competitive generation assets spun off by PPL, including PPL Montana and its Colstrip assets; assets contributed by affiliates of Riverstone at the time of the transaction; and assets Talen has since acquired.
In its complaint, PPL called the claims against it “without merit” and said any funding shortfalls to the retirement plan were instead due to “Riverstone's calculated, self-serving business decisions.”
“…at the time of the 2015 spinoff, Talen was a robustly solvent enterprise with a strong balance sheet,” said Joanne H. Raphael, senior vice president, general counsel and corporate secretary for PPL Corp. “In addition, according to its own disclosures following the spinoff, Talen had a $4 billion equity value with strong cash flows and ample liquidity cushion. It was significantly under-leveraged relative to its peers. Moreover, Talen Montana's pension plan, which covers Colstrip employees and retirees, was well-funded as a result of PPL's actions.”
“…As we set forth in our complaint, under the separation agreement that governed the spinoff, Talen Energy and affiliates of Riverstone definitively agreed that PPL was entitled to retain the proceeds from the sale of the hydro assets,” Raphael said.
PPL's complaint also seeks damages against Riverstone, which it accuses of interfering with the separation agreement and against Riverstone affiliates for breach of the implied covenant of good faith and fair dealing.
In addition, it asks the court to order, on behalf of creditors, the recovery of the $500 million “special cash dividend” that it said Riverstone extracted from Talen Energy in December 2017.
That dividend occurred about one year after Riverstone, Talen Energy’s then largest shareowner, completed a take-private transaction of Talen to become its sole owner, according to the complaint.
A PPL spokesperson, Ryan Hill, said the complaint was filed in Delaware because it was the state where the legal transactions for the original spin-off occurred.
In addition to pursuing its complaint in Delaware court, Hill said PPL will be seeking to have the Montana lawsuit dismissed.
A Talen spokesperson, commented on the suit.
“We believe that PPL’s suit is without any merit and are prepared to defend the Delaware suit,” said Taryne Williams, media and community relations manager for Talen. “As promised, Talen Montana will continue to do the right thing by its employees, pension holders and the State of Montana, and push forward with our valid claims against PPL in the State of Montana.”