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AIG to Divest Financial Products, Maintain Core Insurance

The move announced Friday by American International Group Inc. (AIG) to raise cash by selling off assets outside of its core property and casualty insurance businesses raises questions as to whether one of the assets on the block might be the 50% stake held by subsidiary AIG Financial Products Corp.(AIG-FP) in Tenaska Energy's natural gas marketing companies.

An AIG spokesman said there was not currently a specific list of properties to be divested, but that the reorganization and sales would be aimed at the company's financial products division. AIG-FP in 2007 purchased a half interest in Omaha-based Tenaska Marketing Ventures, Tenaska Marketing Canada and Tenaska Gas Storage, known collectively as TMV (see NGI, March 19, 2007).

The AIG announcement said the company was exploring divestiture opportunities for its businesses outside of its U.S. property and casualty and foreign general insurance specialties in order to repay its loan from the Federal Reserve Bank of New York. AIG has drawn $61 billion of the $85 billion federal credit facility advanced last month to save the giant insurance company from bankruptcy. "AIG is also actively at work on a number of alternatives for its Financial Products business and its securities lending program," the company said Friday. In a conference call AIG executives said they would be focusing on monetizing larger assets first.

A Tenaska spokesperson said it was premature to comment at this point, but "it is important to note that Tenaska remains fully committed and it is business as usual at Tenaska Marketing Ventures. TMV has not experienced any operating disruptions associated with financial pressure on AIG."

Immediately following the announcement last month of AIG's financial crisis, Tenaska assured customers that its operations should not be affected by the insurance company's problems, citing a strong corporate balance sheet plus a five-year $1 billion revolving line of credit that was secured in 2006 from a consortium of financial institutions. Tenaska is the managing partner of TMV. The partnership maintains a one-to-one ratio of primary liquidity (available cash and the revolving line of credit capability) relative to exposure under the guarantees provided by its owners. "We have no problem satisfying requests for collateral when required," said TMV President Fred Hunzeker.

TMV, founded in 1991, ranks tenth on NGI's ranking of Top North American Gas Marketers. The company cited its reputation for a conservative approach to business and its risk management expertise.

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