Hot Potato TPC Picked Up By NIPSCO
TPC Corp. is changing hands yet again as PacifiCorp unloads yet another
non-core asset. NIPSCO Industries subsidiary NI Energy Services is buying
Houston-based TPC for $132.5 million. The deal also involves a payment
for working capital to be determined at closing. NI Energy Services also
gets PacifiCorp's 66% interest (held by TPC) in Market Hub Partners LP
The sale of TPC follows PacifiCorp's October announcement that it would
refocus on its core electricity business in the western United States and
sell its other U.S. businesses (see NGI Nov.
2, 1998). PacifiCorp acquired TPC (formerly Tejas Power) from its founders
in April 1997 for $265 million cash and assumed debt of $140 million (see NGI March 17, 1997; April
21, 1997). In December 1997, PacifiCorp sold the gas gathering and
processing assets of TPC to El Paso Field Services for $196.5 million.
TPC working capital was about $42 million at Dec. 31 and is expected to
decline before the sale as storage inventories decline.
Considering a PacifiCorp total purchase cost for TPC of $405 million
and a gain of $196.5 million from the sale of gathering and processing,
PacifiCorp is losing money on the sale of the rest of TPC, about $34 million.
Spokesman Dave Kvamme said the company will take a charge to fourth quarter
earnings, which have yet to be announced. "Right now we're looking
to sell a number of our non-core assets, and we think this is a fair offer
[for TPC]." Kvamme said he did not know but assumed the company had
other offers for TPC.
TPC is a gas marketer, gas asset portfolio manager and developer of
salt cavern storage. MHP is the largest independent owner and operator
of salt cavern gas storage in North America. MHP's facilities, near Houston
and in Acadia Parish, LA, are at market hubs near the convergence of major
gas pipelines. The combined working storage at the two facilities is more
than 20 Bcf, with potential for additional cavern expansion.
NI Energy Services, which already has about 12% of MHP, will own about
78% of MHP following its purchase of TPC. The transaction is targeted to
close by the end of the first quarter of 1999 but is expected to be complete
by the second quarter at the latest. "This acquisition complements
NI's existing interest in MidTex Gas Storage LLP, in Matagorda County,
TX, and underscores NI's strategy of building a system of assets to serve
the natural gas marketplace," said James K. Abcouwer, NI senior vice
In January MHP subsidiary NE Hub Partners reached agreement with CNG
Transmission and North Penn Gas on some issues regarding the development
of NE Hub's Tioga Gas Storage Project in north central Pennsylvania (see NGI Jan. 18, 1999). In April the Federal
Energy Regulatory Commission (FERC) approved construction of the Tioga
facility, which NE Hub filed for in 1995. Since then, NE Hub and the two
intervenors have battled over the amount of insurance required before NE
Hub could begin construction and drilling. North Penn and CNG still are
contesting other issues surrounding the project. Still, all required regulatory
approvals for the Tioga construction have been acquired. The planned cavern
would provide 2.5 Bcf of capacity by 2001. An additional 12.5 Bcf would
be developed, providing a total of 15 Bcf of capacity upon the cavern's
Abcouwer, who heads NI's Energy Services business unit, said that NI
has demonstrated its belief in the value of high-deliverability storage
for several years now through its ownership position in MidTex and as a
partner in MHP. "Salt cavern storage gives local distribution companies,
marketers and end-users greater flexibility and response to operational
and market conditions. That value keeps increasing as the marketplace becomes
less regulated and rewards this increased flexibility and response.
"We will support the growth of TPC's gas marketing business as
more and more LDCs open their systems to customer choice and call upon
upstream specialists like TPC to help capture every bit of dependability
and value in their gas supply portfolios."
Abcouwer acknowledged NIPSCO has been in an acquisition strategy for
some time now. He said the company is in the market for storage, transmission
and distribution assets. NIPSCO subsidiary Crossroads Pipeline is shooting
for a 300% increase in system throughput with an extension of its Midwest
pipeline system to new interconnects with Northern Border Pipeline and
Natural Gas Pipeline Company of America (see
NGI Feb. 15, 1999). The system currently transports about 150,000 Dth/d
from a connection with NGPL in Schererville, IN, to a connection with Columbia
Gas at Maumee, OH.
Earlier this month, NIPSCO completed its acquisition of Bay State Gas
Co., giving the Indiana-based holding company a powerful East Coast influence
(see NGI Feb. 15, 1999). The $780 million
merger originally was announced in December 1997 and was expected to close
before the end of 1998. Ed Tirello, an analyst with BT Alex Brown, said
at the time that "NIPSCO has done a very good job of implementing
the strategy of drawing a line from the Southwest to the Northeast, then
buying along that line."
The TPC sale is subject to the conditions of the Hart Scott Rodino Antitrust
Improvements Act. NIPSCO and PacifiCorp officials were unavailable for
further comment by press time Wednesday.
In December PacifiCorp said it agreed to a friendly takeover by ScottishPower
(see NGI Dec. 14, 1998). Earlier this month
the companies were granted early termination of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act.
Joe Fisher, Houston