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Vastar To Sell 40% Stake in SCEM to Partner

Vastar To Sell 40% Stake in SCEM to Partner

In a non-binding letter of intent signed last Thursday, Houston-based Vastar Resources agreed to sell its 40% stake in Southern Company Energy Marketing to its partner, Atlanta-based Southern Energy, for $40 million. Southern Energy is a subsidiary of Southern Co.

James Peters, a Southern Co. spokesman, said the tentative agreement remains subject to both boards' and regulatory approval. Vastar is expected to record a gain on the sale of SCEM, but its pending merger with BP Amoco may reduce future earnings. The BP merger is expected to be voted on by Vastar stockholders in September.

Vastar first combined its gas marketing operations with Southern Energy Inc. in late 1997 to form the unregulated energy marketing arm Southern Company Energy Marketing (see NGI, Feb. 2, 1998). At the time of the partnership, Vastar received a $40 million cash payment from Southern Co., and it was recorded as a gain of $33.9 million. It was formed to focus on the wholesale marketplace of utilities, municipalities and cooperatives. It also deals with weather derivatives.

Earlier this month, SCEM reported that its second-quarter electricity sales had declined slightly from 1999, but said that its natural gas sales had increased. SCEM sold 46.7 MM MW hours of electricity during the second quarter of 2000, compared with 49.4 MM MW in 1999. It sold 5.9 Bcf/d of natural gas in the second quarter, up from 4.3 Bcf/d for second quarter 1999

Carolyn Davis

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