Coral Energy won a two-year contract last week to manage thesupply and upstream natural gas assets of KeySpan Energy, theparent company of the nation’s fourth largest gas utility BrooklynUnion, which serves 1.6 million customers in New York City and LongIsland. The deal also covers the fuel supply for KeySpan’s 6,000 MWof electric power generation on Long Island. Financial terms of thedeal, which became effective April 1, were not disclosed. Thecontract was awarded following an 11-month review of competitivebids from multiple marketing and trading companies.

“KeySpan is extremely well positioned in the Northeast, andcreating this relationship with Coral presents tremendousopportunities for both companies,” said Charlie Crisp, CEO of CoralEnergy. “The powerful collaboration of KeySpan’s supply assets andtheir knowledge of the Northeast markets and our marketing andtrading expertise will result in higher returns for both of us.”

Coral will work directly with KeySpan Energy Trading Services tomaximize the value and minimize the net cost of $1.6 billion inKeySpan purchases and upstream utility assets, which includenatural gas pipeline transportation and storage, fuel oilpurchasing and storage, and the sale of emissions credits.

The arrangement replaces and covers a wider span of operationsthan the $500 million contract KeySpan subsidiary Brooklyn Union(BU) signed with Enron in 1998, KeySpan spokesman Robert Mahonysaid. However, unlike the Enron deal, Coral will not be takingcontrol of BU’s assets (capacity on six pipelines, 36 Bcf ofworking storage capacity and one LNG plant with 1.5 Bcf of storage)nor its supply contracts, which cover about 200 Bcf/year (nearly550 MMcf/d) of gas with 50 suppliers.

“By switching from the Enron deal to this one, we gainflexibility,” said Robert Brown, a KeySpan spokesman. “We now canleverage our own assets, which is the goal we wanted to achieveconsidering all the new initiatives at KeySpan and in the energyindustry.”

Coral will be assisting KeySpan in managing BU’s supply andupstream gas transportation. Coral was quick to point out that thisagreement is not an outsourcing deal. “This is an alliance in whichwe will put Coral people in the energy management offices ofKeySpan, to help them with energy decisions,” said Jimmy Fox, aCoral spokesman.

Brown did not disclosed whether this deal included added supplyagreements. Coral and its parent, Shell, have supplied gas toKeySpan for 13 years. During the past two years, Coral has alsoassisted BU with asset management and risk management.

KeySpan CEO Bob Catell said, “By leveraging KeySpan’s regionalassets with Coral’s national market network we can increase savingsfor our gas customers and, under our regulatory agreement approvedby the New York Public Service Commission, we can realize a portionof those savings for the benefit of KeySpan’s shareholders.”

Under Brooklyn Union’s prior agreement with Enron, the marketingcompany promised savings of $10 million/year. Expected savings fromthe deal with Coral were not disclosed.

John Norris

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