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Direct Energy to Pay $300M for Strategic Energy

Direct Energy, a subsidiary of Centrica plc, has signed an agreement to acquire Pittsburgh-based Strategic Energy LLC, a subsidiary of Great Plains Energy Inc., for a total cash consideration of $300 million, the company said last Wednesday. The transaction is debt-free and includes an amount of working capital that will be subject to a subsequent true-up.

The merger of Strategic Energy with Direct Energy's existing commercial and industrial (C&I) business unit, Direct Energy Business, will create a business supplying almost 55 terawatt hours (TWh) of electricity and gas to customers annually, Direct Energy said.

Direct Energy owns and operates approximately 3,000 natural gas wells in Alberta and three gas-fired power plants in Texas, and has renewable power purchase agreements totaling 813 MW in Texas. Strategic Energy is licensed to supply retail electricity to customers in deregulated energy markets in California, Connecticut, Delaware, Illinois, Maryland, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania, Texas and Washington, DC.

Earlier this year Direct Energy acquired Alberta producer Rockyview Energy Inc. (see NGI, Feb. 4). In that deal, Direct Energy paid C$3.16/share -- a 29% premium over the 20-day weighted average closing price -- for what amounted to a C$113.3 million transaction. Rockyview Energy has conventional oil and gas and coalbed methane operations in central and western Alberta and the Peace River Arch in northwestern Alberta. In addition to a production base of 2,700 boe/d -- 97% of it natural gas -- Rockyview has a 100,000-acre undeveloped land portfolio with numerous identified drilling locations.

"Acquiring Strategic Energy is core to Direct Energy's strategy of building material business in commercial and industrial energy markets," said Direct Energy CEO Deryk King. "This acquisition makes us a top three energy retailer in the business market and, following our recent purchase of Rockyview Energy, we are well positioned to pursue further aggressive organic growth across North America."

The company's complementary footprint, portfolio, skills, culture and management philosophy will enable Direct Energy to accelerate its growth plans through immediate scale benefits post-integration and further cross-selling opportunities, King said.

The transaction is subject to regulatory approval and is expected to close in June.

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