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Industry Briefs

Industry Briefs

Baker Hughes and Schlumberger plan to create a new seismic venture called Western GECO that would combine and own the seismic acquisition assets, data processing assets, and multi-client seismic libraries and other assets of their existing subsidiaries Western Geophysical and GECO-Prakla. The transaction is expected to be completed before the end of the year and is subject to regulatory approvals. Upon formation of the venture, Baker Hughes would receive from Schlumberger $500 million in cash. The transaction would also allow Baker Hughes to make certain working capital and asset reductions valued at $100 million. Baker Hughes and Schlumberger would own 30% and 70% of the venture, respectively. The companies have made filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and are responding to requests for additional information from the Department of Justice. In addition, Baker Hughes and Schlumberger intend to make additional filings with regulatory authorities in certain European and other countries.

Peabody Group, the world's largest coal company, sold its Citizens Power unit to a subsidiary of Edison International, as well as selling its third-party power contracts. Peabody, owned by Lehman Merchant Banking Partners, is expected to net about $100 million from the two transactions, using the money to pay down debt. Citizens Power, one of the top 10 power marketers in the United States, traded 92.3 MM MW hours in 1999. It will be merged into an Edison Mission Energy subsidiary, Edison Mission Marketing & Trading (EMMT). Edison Mission Energy (EME), a merchant power plant, has more than 13,200 MW, and the merger is considered pivotal to improving EME's marketing capabilities in U.S. power markets. "Edison Mission Energy has developed a strong generation presence in several of the most attractive U.S. power markets," said CEO Alan J. Fohrer. He said the merger should give EMMT a competitive advantage. EMMT will be based in Boston, and will operate in the former Citizens Power headquarters there. Citizens Power President Mark Maisto will continue run the company.

PG&E Corp.'s National Energy Group entered into an agreement with Duke Energy North America to purchase the company's Attala Energy facility. Attala is a 500 MW natural gas-fired merchant generation plant located in central Mississippi. The plant which is still under construction, is expected to be in commercial service during the summer of 2001. The plants output will be delivered into the Entergy wholesale market. "This purchase makes us an early and well-positioned entrant into the region's power market," said Greg Kelly, vice president Marketing and Business Development of the National Energy Group's Eastern Region. The companies expect the acquisition to be completed by the end of September pending regulatory approval.

Conoco and online trading firm HoustonStreet Exchange are in the process of forming a joint venture to design, develop and market a web-based version of Conoco's automated mid and back office energy trading activities for the global energy market. The new venture will develop technology based on Conoco's existing Crude Oil Information Network (COIN), an automated service which provides pricing, contracting, scheduling, settling and benchmarking of physical crude oil trades. The companies believe that the automation process can save energy companies a sizeable amount of money. HoustonStreet will help develop COIN into an online program that will be available on the web through an application service provider. The name of the joint venture will be released at a later date.

The Georgia Public Service Commission voted 5-0 last Tuesday to crack down on marketer billing problems by issuing a Notice of Proposed Rulemaking that would not hold customers to payments on bills that are more than 90 days late. The NOPR also would require that bills be 90% accurate and list charges in a uniform fashion. The commission received more than 3,000 complaints about billing just during the month of August. Billing problems also have been behind several retail marketer bankruptcies in the state. The PSC invites pubic comment on the NOPR, which is available on the Internet at the PSC's web site: http://www.psc.state.ga.us/. A final vote on the matter is scheduled for November.

North Carolina Natural Gas, a subsidiary of CP&L Energy, is selling its propane operation to Jenkins Gas and Oil Co., North Carolina's largest independently-owned propane gas company with 35,000 customers. NCNG's propane division totals nearly 12,000.

St. Louis, MO-based AmerenEnergy Marketing entered into a power supply agreement with the not-for-profit Illinois Energy Consortium (IEC). The consortium supplies power for schools, colleges and universities. IEC acts as an aggregator of retail electric loads, and disperses the savings between its members. 500 school facilities and 120 school districts throughout southern and central Illinois are covered under the agreement which will go into effect on Sept. 18.

Denver-based independent Western Gas Resources Inc. said it would sell its Arkoma gathering system for $10.5 million to an undisclosed buyer. The system consists of 74 miles of gas gathering lines in the Arkoma Basin of eastern Oklahoma, and gas throughput volumes averaged 11 MMcf/d for the first six months of 2000. Western said it would recognize an after-tax gain on the sale of nearly $4 million, or $0.12 per share of common stock for the third quarter of 2000.

TradersNews Energy, based in Houston, launched a wholesale power industry hourly pricing index for the Cinergy trading hub. The index was developed in response to traders' requests for ways to hedge their risks against the market's volatility. The first of several hourly indices is expected to become a benchmark for financial hourly trading and for hedging instruments such as swaps and spreads. The TNI also will allow traders to extrapolate long-term pricing and determine power replacement costs. The index will track the range and weighted average price of trading done for each on-peak hour, Monday through Friday. If no trades are reported for an hour, "indicative" pricing, derived from the tightest bid/ask spreads for that period, will be provided. The index is available at www.tradersnewspower.com.

Koch Energy Trading's new web site KochEnergy.com went live, offering a wide range of features and in-depth information to select Koch customers. "KochEnergy.com provides customers with insight into the energy markets through a wide range of information," said Rob Smith, e-commerce leader for Koch Energy Trading. "The goal of this site is to enhance our customers' decision-making process on energy risk management strategies." Digital services provider Delinea helped in constructing the site. The company's customers will be able to access trade information, including hedge analysis designed by Koch. Customers also will be able to study and evaluate the effectiveness of different hedging strategies. The web site also will feature selected OTC prices from Koch Energy Trading, weather forecasts from Koch's meteorologists, real-time news feeding on various topics, charting tools to view the proprietary historical price archive of Koch Energy Trading and real-time energy prices from NYMEX.

CMP Group, the parent company of Central Maine Power Co., said that Energy East Corp. completed its $1.2 billion buyout of the Maine utility company. The U.S. Securities and Exchange Commission, the last governmental agency whose approval was required, signed off on the deal last Thursday. Under the agreement, Energy East purchased all CMP's common stock for $29.50 a share and assumed $271 million in preferred stock and long-term debt. The merger was announced in June 1999. Energy East has about two million distribution customers, including 1.4 million electric customers and 600,000 natural gas customers.

Conectiv sold a portion of its Conectiv Services unit to UGI Corp. The sale involves the commercial and residential services units located in southeastern Pennsylvania and northern Delaware, which employ 460 people. Terms of the sale were not disclosed. The move continues Conectiv's previously announced plan to exit businesses it no longer considers strategic, seek a partner for its telecommunications business and its plan to focus on its core businesses. In July, Conectiv announced the sale of its Conectiv Thermal joint ventures in California and Nevada and the Mechanical Division of Conectiv Services. Conectiv acquired a total of 21 firms with annual revenues of $140 million since 1996 as part of its efforts to build Conectiv Services into a full-service heating and cooling business. UGI's ongoing objective is to grow earnings 6%-10% per year, increase its dividend 3% per year, grow its domestic AmeriGas Propane and utility operations and invest in related and complementary businesses. The company has continued to invest in its regional gas marketing and HVAC service businesses and in European propane distribution.

With winter fast approaching, the Ohio Consumers' Council (OCC) is advising residential consumers that increased cost in natural gas pricing will correspond to higher monthly bills. The council is also informing consumers that taking part in a natural gas choice program may help consumers to save money. "If there ever was a time to shop for a natural gas supplier, this is it," said Robert S. Tongren, OCC. Although prices from an alternative supplier will be higher than previous years, consumers still have the opportunity to beat the price offered by their local natural gas utility." Ohio's residential customers are invited to call 1-877-PICKOCC to learn more about customer choice programs from companies such as Columbia Gas, East Ohio Gas and Cincinnati Gas and Electric.

Shiningbank Energy Income Fund, based in Calgary, said it had entered into an agreement to acquire a package of long-life natural gas producing properties and undeveloped land in west-central Alberta for US$47.7 million. Current daily production from the properties is estimated to be 9 MMcf of gas and 250 BOE and natural gas liquids for total daily production of 1,750 BOE. All of the acquired gas production will be sold on the spot market, bringing Shiningbank's gas sales portfolio to about 45%. The properties include a mix of operated and non-operated assets in Dunvegan, Belloy, Anselmo, Barrhead and Penhold areas. Shiningbank already owns working interests in the Anselmo and Penhold properties, and has adjacent operations at Barrhead. Also included in the acquisition is an estimated C$2.9 million of undeveloped land - about 33,000 net acres - in west-central Alberta.

The Los Angeles Department of Water and Power (LADWP) will be proposing the largest incentives for energy-efficiency programs in city history to help reduce peak load next summer. Upon review by the city council, LADWP proposes to offer incentive payments of up to $400 per kWh of energy savings to commercial and industrial customers who install high-efficiency chiller units by June 2001. The $14 million program also would boost incentives for installing heating and lighting systems from $250 to $400.

The Federal Energy Regulatory Commission changed the date of its public meeting on California's power market woes to Sept. 12. The meeting will be held at 9 a.m. at the San Diego Concourse in the Copper Room , 202 C Street in San Diego, ground zero for the power market problems in California. The meeting will allow interested parties to state their views on the market situation in California. Additional information is available from FERC's Office of External Affairs at (202) 208-0870 and the Commission web site: www.ferc.fed.us.

TXU Electric, a wholly owned subsidiary of TXU, received a partial ruling from the Texas District Court of Travis County regarding its appeal of a financing order of the Public Utility Commission of Texas (PUCT). The PUCT order authorizes securitization of regulatory assets under Senate Bill No. 7, Texas legislation that restructures the electric industry and authorizes retail competition. Securitization of regulatory assets is a tool adopted by the bill to provide a low-cost way for the electric industry to transition to a competitive environment. The district court gave a partial ruling reversing that part of PUCT's financing order that used regulated asset life (up to 40 years) for purposes of present-valuing the benefits of securitization. The court ruled that present-value period based on asset life did not conform to the applicable statute. Instead, it believed that a present-value period based upon stranded cost and regulatory asset recovery period should have been used by PUCT. The court did not set a value period to be used, but said that PUCT could, for example, use the alternative 12-year discounting period contained in its financing order with the amount to be securitized by TXU Electric increased to $1.3 billion from $363 million. A final ruling from the court is due Sept. 5.

Southern California Edison (SCE) in an attempt to ease the power crunch this summer, settled on an agreement with Thermo Ecotek that will allow the utility to lease and return to operation a 120 MW natural gas-fired power plant that currently sits idle. SCE plans to have the plant fully operational by early September to help with the late summer demand peak. "We're trying to do everything we can to bring solutions to the power supply dilemma in California," said Stephen E. Frank, CEO of SCE. "That includes exhausting local alternatives, negotiating new agreements, and effectively managing every available generating asset that can benefit consumers." The "standby" plant was operated by Massachusetts-based Thermo Ecotek last summer, but has been idle this entire summer to date.

Minnesota Power has started doing business as Allete, a name the company says better reflects its evolution from a utility to a more diversified corporation. The company's regulated electric business will continue to be called Minnesota Power. "With diverse, profitable and growing businesses operating in 39 states and eight Canadian provinces, we are clearly more than Minnesota and more than power," said Chairman Ed Russell.Shareholders will be asked to formalize the name change during the company's annual meeting next May 8. The company will begin trading on New York Stock Exchange under the ticker symbol ALE.

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