NEW YORK (Dow Jones) -- Private-equity giant Blackstone Group LP agreed to buy Dynegy Inc. for about $542 million while assuming billions in debt, acquiring the struggling power generator during a prolonged slump in power prices.

As part of the deal, Blackstone would take in $1.36 billion in cash from NRG Energy Inc., selling the Princeton, N.J., power producer nearly one-third of Dynegy's generation capacity. NRG also announced Friday it would acquire an additional plant in Texas from a privately held generator.
The deals are the latest in a series of power-producer acquisitions at a time when the industry has struggled with weak power prices and back-to-back years of declining demand. Buyers are eying opportunities to pick up plants on the cheap, while sellers smarting from the ongoing slump are looking to exit.
The Blackstone deal signals a willingness to make a bet on an industry recovery, and particularly, on plants that run on coal. Those plants have drawn little recent interest from buyers amid the threat of more stringent environmental regulations and concerns over eventual restrictions on greenhouse-gas emissions.
The Dynegy deal, when including the debt, is Blackstone's biggest purchase since it announced its $25.1 billion buyout of Hilton Hotels in 2007, according to research firm Capital IQ.
Meanwhile, NRG would snatch up four Dynegy natural-gas fueled plants in California and Maine for $1.36 billion, as it continues to look for assets to reduce its overall emissions and increase geographic diversity. Other generators have made similar moves, including Calpine Corp. and Constellation Energy Group Inc., in recent months.
The deal between Blackstone and Dynegy values Houston-based Dynegy's equity at $4.50 a share, a 62% premium to Thursday's close, though shares of the company had fallen sharply this year and were trading at eight-year lows this week, adjusting for a stock split earlier this year. Dynegy shares were up 59% to $4.42 in recent trading, while Blackstone and NRG both edged lower.
The bulk of the deal involves Blackstone taking on Dynegy's bulging debt balance, which it said last week was at $4.8 billion. It also said it had about $2 billion in cash, short-term investments and unused credit facilities.
Even taking the cash that Blackstone is getting from Dynegy, Blackstone would be left holding a sizable amount of debt in the deal, though major portions don't start to come due until 2015.
Bond traders reacted by sending prices of the bonds down and yields up on some of Dynegy's bonds, with high trading volume, signifying nervousness about the safety of Dynegy's debt.