By Inti Landauro and Lisa Beilfuss 

Dynegy Inc. said Thursday it would buy Engie's U.S. fossil portfolio for $3.3 billion, snapping up assets from the beleaguered French power utility in its latest move to bulk up.

Engie, formerly known as GDF Suez, said the asset sale was part of its strategy to reduce exposure to falling energy market prices and to slash debt. The French power utility also sold hydropower plants with a capacity of 1.2 gigawatts to Canadian pension fund PSP Investments for $1.2 billion.

Houston-based Dynegy said it would make the purchase through a newly formed joint venture, named Atlas Power, with Energy Capital Partners. The private-equity firm is investing an additional $150 million in Dynegy, boosting its stake to 15%. As part of the agreement, Energy Capital will control one seat on the company's board for as long as its stake tops 10% and will own 35% of the joint venture.

Dynegy Chief Executive Officer Robert Flexon called the deal "a compelling value" as it is "the right assets, in the right markets, at the right price."

For Dynegy, the deal is the latest in a series since it emerged from bankruptcy protection in late 2012. In August 2014, the company nearly doubled its power-generating capacity when it bought 21 plants for $6.25 billion from Duke Energy Corp. and Energy Capital Partners.

Dynegy and Energy Capital said they expect to see $90 million in annual cost savings through the acquisition.

Engie reported on Thursday that it had tumbled to an unexpected net loss in 2015 after writing down EUR8.7 billion ($9.58 billion) worth of assets because of current market conditions, mainly in the oil and gas-extraction industry and on power generation assets supplying spot markets. Engie said it would shed some EUR15 billion ($16.54 billion) in assets.

The sales are part of a three-year turnaround plan to lower Engie's exposure to spot energy prices by selling a total of EUR15 billion in assets. Selling the assets at a time when energy markets are facing a glut is costly. The utility said it had booked a EUR1 billion loss from the sales of U.S. assets.

Engie Deputy Chief Executive Isabelle Kocher said the company would use the proceeds of the U.S. asset sales to reduce its debt, adding that the utility plans to further cut debt by EUR1.4 billion by selling coal-fired power plants in India and Indonesia.

"We are in very advanced talks for the sale of other assets," said Ms. Kocher, who is due to replace Gerard Mestrallet as CEO in the coming weeks. Mr. Mestrallet said he would remain nonexecutive chairman of the company's board.

Engie is suffering from a collapse of oil and gas prices over the past two years that, combined with renewable energy subsidies in Europe, has made it hard to turn a profit with traditional power plants.

The utility's turnaround plan aims to invest EUR22 billion in operations and assets that generate regulated fees, renewables and services to companies and public institutions. Engie hopes to expand that business to 85% of earnings before interest taxes, depreciation and amortization from 50% at the end the end of 2015.

Write to Inti Landauro at inti.landauro@wsj.com and Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

February 25, 2016 09:09 ET (14:09 GMT)