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Under that agreement, Dynegy agreed to sell five peaking plants and three natural gas combined-cycle facilities to LS Power, as well as Dynegy's interest in a project under construction in Texas.
The peaking plants include the Tilton and Rocky Road plants in Illinois, plus two in Kentucky and one in Michigan. The combined-cycle plants are in Arizona and Connecticut.
The proposed transfer comes as part of a deal in which Houston-based Dynegy would receive more than $1 billion in cash and 245 million shares of Dynegy stock held by LS Power.
According to a Dynegy press release, the deal enables the company to increase its liquidity and financial strength and specifically help it deal with near-term debt maturities.
The sale would leave Dynegy with 13,000 megawatts of generating capacity in seven states. Forty-three percent of its capacity will be in the Midwest, 32 percent in the West and 25 percent in the Northeast.
Dynegy said it wanted to concentrate on "strategic core operating assets" as power markets recover. The company said it expects its base-load coal plants such as the Vermilion power plant near Oakwood and natural gas combined-cycle plants to provide the most value in the future.
"Of the assets proposed to be sold, peaking assets are typically marginal, and two of the combined-cycle units (to be sold to LS Power) have long-term contracts that expire in 2017 or later, limiting their upside potential as market conditions improve," the company said in announcing the deal.
LS Power has been involved in the development, construction or operation of more than 20,000 megawatts of power generation. In the Midwest, its projects include a 1,160-megawatt natural gas continuous-cycle plant in Minooka and a 245-megawatt natural gas continuous-cycle co-generation plant in Whitewater, Wis.
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