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Coral to Help Manage KeySpan's Supply, Assets
Coral Energy won a two-year contract last week to manage the supply and upstream natural gas assets of KeySpan Energy, the parent company of the nation's fourth largest gas utility Brooklyn Union, which serves 1.6 million customers in New York City and Long Island. The deal also covers the fuel supply for KeySpan's 6,000 MW of electric power generation on Long Island. Financial terms of the deal, which became effective April 1, were not disclosed. The contract was awarded following an 11-month review of competitive bids from multiple marketing and trading companies.
"KeySpan is extremely well positioned in the Northeast, and creating this relationship with Coral presents tremendous opportunities for both companies," said Charlie Crisp, CEO of Coral Energy. "The powerful collaboration of KeySpan's supply assets and their knowledge of the Northeast markets and our marketing and trading expertise will result in higher returns for both of us."
Coral will work directly with KeySpan Energy Trading Services to maximize the value and minimize the net cost of $1.6 billion in KeySpan purchases and upstream utility assets, which include natural gas pipeline transportation and storage, fuel oil purchasing and storage, and the sale of emissions credits.
The arrangement replaces and covers a wider span of operations than the $500 million contract KeySpan subsidiary Brooklyn Union (BU) signed with Enron in 1998, KeySpan spokesman Robert Mahony said. However, unlike the Enron deal, Coral will not be taking control of BU's assets (capacity on six pipelines, 36 Bcf of working storage capacity and one LNG plant with 1.5 Bcf of storage) nor its supply contracts, which cover about 200 Bcf/year (nearly 550 MMcf/d) of gas with 50 suppliers.
"By switching from the Enron deal to this one, we gain flexibility," said Robert Brown, a KeySpan spokesman. "We now can leverage our own assets, which is the goal we wanted to achieve considering all the new initiatives at KeySpan and in the energy industry."
Coral will be assisting KeySpan in managing BU's supply and upstream gas transportation. Coral was quick to point out that this agreement is not an outsourcing deal. "This is an alliance in which we will put Coral people in the energy management offices of KeySpan, to help them with energy decisions," said Jimmy Fox, a Coral spokesman.
Brown did not disclosed whether this deal included added supply agreements. Coral and its parent, Shell, have supplied gas to KeySpan for 13 years. During the past two years, Coral has also assisted BU with asset management and risk management.
KeySpan CEO Bob Catell said, "By leveraging KeySpan's regional assets with Coral's national market network we can increase savings for our gas customers and, under our regulatory agreement approved by the New York Public Service Commission, we can realize a portion of those savings for the benefit of KeySpan's shareholders."
Under Brooklyn Union's prior agreement with Enron, the marketing company promised savings of $10 million/year. Expected savings from the deal with Coral were not disclosed.
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