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Barclays, UBS Get Waiver Extension to Address Acquisition Issues

FERC last Monday approved a second extension of a temporary waiver of the agency's capacity-release rules so remaining issues related to Barclays Bank PLC's acquisition of UBS' natural gas trading portfolio can be addressed.

In December 2008 the Federal Energy Regulatory Commission (FERC) approved a waiver of its shipper-must-have-title policy and its prohibitions on buy-sell arrangements and tying arrangements for 90 days after the closing of the Barclays-UBS transaction on Jan. 15.

London-based Barclays and UBS, a subsidiary of Switzerland-based UBS AG, requested the waiver because they feared that in their haste to close the transaction and transfer the trading assets, they might commit "inadvertent violations of the Commission's policies or regulations."

The first extension of the waiver, which runs until July 14, was granted by FERC in mid-April. "Barclays and UBS have worked diligently since closing to complete the steps necessary to effectuate the transfer of assets within the initial waiver period, as well as the extension of time subsequently granted by the Commission on April 14," the companies said in seeking a second extension [RP09-159].

"Although Barclays and UBS believe that they can finish most of these steps by July 14, they request an additional 45-day extension to finalize this process because there remain a small number of outstanding consents that must be secured from counterparties (e.g., gas purchasers and suppliers) to enable the correct alignment of transportation rights with ownership of the natural gas being transported.

"The additional time is also needed so that, as part of the integration of UBS' natural gas agreements, Barclays may establish an asset management agreement between Barclays and Barclays Capital Energy Inc. (BCEI) whereby Barclays would release to BCEI all transportation and storage capacity [sold] by UBS to Barclays pursuant to the transaction," they said. The second extension would run until Aug. 28, according to the FERC order.

With the sale of its trading assets to Barclays, UBS effectively exited its commodities business in the United States, excluding precious metals. Barclays acquired all of UBS' energy and natural gas agreements, including gas purchase and sale agreements, as well as gas transportation and storage agreements (see NGI, Jan. 19).

UBS unloaded its commodities business as part of a repositioning of its investment banking division, and in response to the downturn in financial markets (see NGI, Oct. 6).

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