Riverstone’s affiliated entities currently own approximately 35% stake in Talen Energy, which went public last year.
Under terms of the agreement, Riverstone will pay $14 per share for the 65% stake it does not own in Talen Energy.
Talen Energy president and CEO Paul Farr said: "We believe the transaction offers compelling value to our stockholders, while eliminating execution risk, and will provide additional momentum to the outstanding work our employees have done to drive improvements in the safety, reliability and efficiency of our plants in the time since we became an independent company."
As per the deal, Talen has the option to solicit better offers over the next 40 days. It can also continue negotiations with potential parties during the ‘go-shop’ period for an additional 20 days.
Talen Energy board of directors chairman Stuart Graham said: "The disinterested directors of the Board, not including the two Riverstone directors, with the assistance of our financial and legal advisors, carefully analyzed Riverstone’s offer, and after extensive negotiation and thorough consideration, concluded that the agreement we are announcing today is in the best interests of our stockholders."
Subject to regulatory approval and other customary closing conditions, the transaction is planned to be completed by the end of the year.
In 2015, Talen Energy agreed to divest three power plants in Pennsylvania for $1.51bn, in order to comply with the rules of Federal Energy Regulatory Commission (FERC).
The FERC imposed this condition in 2014 when it approved the creation of Talen Energy, a spinoff of the power generation assets of PPL Energy Supply and investment firm Riverstone affiliate RJS Power.