Shell plc SHEL is taking steps to optimize its U.S. power portfolio through two transactions involving natural gas-fired generation assets. The company’s subsidiary, Shell Energy North America (U.S.), L.P. (“SENA”), has agreed to acquire a 100% equity interest in Hunlock Creek Generating LLC (Hunlock) while selling its interests in RISEC Holdings, LLC (“RISEC”) to Constellation Energy Generation, LLC for $715 million.
The transactions reflect Shell’s strategy of actively managing the power portfolio by investing in assets that complement its trading and optimization capabilities while monetizing assets when market conditions provide attractive returns. Both transactions are subject to regulatory approvals and are expected to close in the first quarter of 2027.
Hunlock Acquisition Expands PJM Power Exposure
The acquisition of Hunlock will strengthen SHEL’s subsidiary SENA’s presence in the PJM Interconnection power market, the largest wholesale electricity market and grid operator in the United States. PJM manages electricity transmission across 13 states and the District of Columbia, serving more than 65 million people.
Hunlock and its subsidiary own 169 megawatts (MW) of natural gas-fired generation capacity in Pennsylvania. The portfolio consists of two units, a 125-MW combined-cycle power plant and a 44-MW simple-cycle peaking plant.
The combination of baseload-oriented combined-cycle generation and flexible peaking capacity should provide SENA with additional capabilities to respond to changing power demand and market conditions. Access to flexible natural gas-fired generation also supports Shell’s broader trading and optimization activities in the PJM market.
The acquisition is strategically aligned with its focus on power markets where Shell can leverage its trading expertise. SENA has been increasing access to flexible power plants and battery energy storage systems as it seeks to strengthen position in power trading and optimization.
Importantly, Shell, a British multinational oil and gas company headquartered in London, England, expects the Hunlock acquisition to generate returns above the investment requirements established for the power business at its 2025 Capital Markets Day. This indicates that management views the asset as capable of delivering attractive returns while supporting the company’s broader power-market strategy.
RISEC Sale Accelerates Value Realization
While Shell is adding generation capacity through Hunlock, it is simultaneously monetizing the interests in RISEC. SENA will sell its interests in RISEC Holdings to Constellation for $715 million.
RISEC owns a 609-MW, two-unit combined-cycle gas turbine power plant serving the New England power market. SENA has maintained an energy conversion agreement covering the plant’s full electricity output since 2019. The agreement will terminate once the transaction is completed.
The RISEC transaction enables SENA to accelerate value realization from an asset that had previously provided access to capacity and associated trading opportunities. Rather than continuing with longer-term ownership, Shell will recognize the value of the asset through the sale, which it expects to result in a significant gain.
The transaction demonstrates Shell’s willingness to recycle capital when attractive opportunities emerge. The company can use proceeds from asset sales to support investments in areas offering stronger strategic and financial returns.
Portfolio Optimization Remains Key
The two transactions highlight Shell’s dynamic approach to managing its U.S. power portfolio. The company is not only simply expanding its generation footprint but also selectively acquiring assets that can strengthen the trading position while exiting investments when valuations and market conditions create an opportunity to lock in value.
Andrew Smith, Shell’s president of Trading & Supply, said the transactions reflect the approach of selectively investing in assets that strengthen its market position and create value, while remaining prepared to realize value when market conditions are favorable.
This strategy is particularly relevant as U.S. electricity markets continue to evolve amid changes in power demand, generation mix and grid requirements. Natural gas-fired plants can provide flexibility to support power markets as renewable generation expands, potentially increasing the value of assets that can respond quickly to changes in supply and demand.
For investors, the transactions demonstrate Shell’s focus on disciplined capital allocation and asset-backed trading. The Hunlock acquisition adds 169 MW of flexible generation capacity in the strategically important PJM market, while the $715 million RISEC sale provides a significant monetization opportunity.
Bottom Line
Shell’s latest U.S. power portfolio moves represent a balance between targeted investment and timely divestment. The Hunlock acquisition should strengthen SHEL’s subsidiary position in PJM and enhance its access to flexible natural gas-fired generation. The RISEC sale allows the company to accelerate value realization and generate a significant gain.
The transactions underscore Shell’s broader strategy of combining physical power assets with trading and optimization capabilities. If successfully executed, the portfolio reshaping could improve capital efficiency while positioning SHEL’s subsidiary to capture opportunities in major U.S. power markets.
SHEL's Zacks Rank & Key Picks
Currently, SHEL has a Zacks Rank #3 (Hold).
Investors interested in the energy sector might consider some better-ranked stocks, such as Par Pacific PARR, Delek US Holdings DK, both sporting a Zacks Rank #1 (Strong Buy), and Oceaneering International OII, carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Par Pacific is valued at $4.16 billion. It is a diversified energy company that owns and operates petroleum refineries, logistics assets and retail fuel businesses across the United States. Par Pacific focuses on refining, transporting and marketing fuel products while serving regional markets with reliable energy solutions.
Delek US Holdings is valued at $4.61 billion. It is a diversified downstream energy company engaged in petroleum refining, renewable fuels, asphalt production and logistics operations. Delek US Holdings operates multiple refineries in the United States and is committed to delivering safe, reliable energy while investing in cleaner energy initiatives.
Oceaneering International is valued at $4.83 billion. It is a global technology and engineering company. Oceaneering International provides subsea robotics, offshore services, engineered products and advanced solutions to the energy, defense, aerospace and other industries.
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This article originally published on Zacks Investment Research (zacks.com).