With an eye toward concentrating on retail marketing, E&ampP anddistribution, Consolidated Natural Gas followed through last weekon its plan to exit the wholesale energy marketing business becauseof its tight margins and dependency on larger scale operations. Thecompany found a willing buyer in rapidly growing Sempra Energy, alarge West Coast enterprise looking to broaden its marketing baseand its geographic horizons. The San Diego-based utility holdingcompany, formed by the merger of Pacific Enterprises and Enova,bought all of CNG’s wholesale gas supply, sales, storage andtransportation agreements for $48 million.

CNG announced plans to exit the wholesale business in Aprilfollowing a $17.2 million first-quarter loss. The Pittsburgh-basedutility holding company took a first quarter $66 million pretaxcharge against earnings to cover discontinuing wholesaleoperations, including the layoff of 125 employees. Sempra said itintends to pick up only 10 CNG staffers in the acquisition.

CNG also is discontinuing its wholesale power marketingoperations, which sold 7.5 million MWh in the first quarter, but aspokesman said a sale of its power contracts isn’t likely. Thepower contracts are being phased out.

The company’s gas operations will propel Sempra into the top-10largest gas marketers by volume in North America, adding about 3.1Bcf/d of commodity trading contracts with local distributioncompanies, municipalities and major industrial corporations toSempra’s 3.7 Bcf/d operation. CNG’s concentration in the Northeastand Midwest and Sempra’s already prominent position in thoseregions create an eastern market powerhouse matched by only thelargest gas marketers. The deal includes a 10 Bcf chunk of workingstorage capacity on CNG Transmission, Transco, Tetco, East Ohio andTransCanada, and 600 MMcf/d of capacity on 10 eastern pipelines.

Sempra said the acquisition sharply increases its ability tomove gas to virtually all local gas distribution companiesthroughout the eastern half of the country. “We see substantialbenefits from this acquisition, including an expansion of ourcommodity trading activities with municipal and utility customersand the addition of long-term contractual relationships with anumber of blue-chip industrial customers,” said David Messer,president of Sempra Energy Trading. “This deal also allows us tobuild on our already strong market position in the Northeast andMidwest.” It puts Sempra “firmly within the top-10 natural gastraders in the United States.”

Messer said Sempra is “comfortable the purchasing pricerepresents good value. I do not know why CNG was unable to makemoney in this business. As you know there are many energy marketingcompanies, ourselves among them, who are profitable in the energytrading business. This set of contracts will complement ouroperations very nicely.” The deal is expected to be completed inAugust following regulatory approval. Rocco Canonica

Merger Charge Hinders Sempra Earnings

Second quarter results of newly formed Sempra Energy wereaffected by a $75 million after-tax charge, mainly stemming fromthe merger of Enova Corp. and Pacific Enterprises, which formed thenew company. Enova and Pacific Enterprises, reported consolidatednet income of $31 million, or 13 cents/share, for the secondquarter of 1998. Excluding one-time costs, Sempra second-quarterearnings were $106 million, or 45 cents per diluted share. In thesecond quarter of 1997, consolidated net income was $112 million,or 47 cents a diluted share, including $8 million, or 3 cents adiluted share, of merger-related costs.

Revenues for Sempra Energy totaled $1.3 billion for the secondquarter 1998, compared with $1.1 billion for the prior year’squarter. For the first six months of 1998, revenues totaled $2.7billion, compared to $2.4 billion during the first six months of1997.

During the second quarter, consolidated financial results forthe two major utility subsidiaries, excluding merger-related costs,were $103 million, compared to $123 million for the same period of1997. Southern California Gas results included net income of $51million, compared with $70 million for the same period of 1997. Thesix-month earnings for 1998 were $97 million compared to $128million recorded last year. Gas volumes delivered by SoCalGas forthe quarter ended June 30, 1998, totaled 234 Bcf the same as lastyear. San Diego Gas &amp Electric net income was $52 million,versus $53 million for the same period last year. Six-monthearnings were $104 million, compared to $97 million for the firsthalf of 1997.

Joe Fisher, Houston

©Copyright 1998 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.