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Hot Potato TPC Picked Up By NIPSCO

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 (MHP).

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 president.

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 completion.

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

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