Merrill Lynch & Co. completed its purchase of the energy trading businesses of Entergy-Koch LP, a venture of Entergy Corp. and Koch Energy that was among the top five largest natural gas marketers by volumes sold in the second quarter of 2004 with 7.3 Bcf/d of physical natural gas sales. The trading operation also is one of the largest power sellers in North America.

Terms and conditions of the transaction were not disclosed. New Orleans, LA-based Entergy previously said it expected the proceeds from the sale of the energy trading unit, as well as its natural gas pipeline and storage assets, which are being sold separately, to reap about $1 billion.

The companies have retained Lehman Brothers to coordinate offers for Gulf South Pipeline Co. LP., which owns and operates an 8,000-mile natural gas pipeline system and associated storage facilities servicing gas transportation and storage needs throughout the Gulf Coast. The pipe, which extends from South Texas through the Gulf Coast region into Florida, transports 2 Bcf/d, includes 32 compressor stations and more than 100 major interconnects. The company’s Bistineau, LA, and Jackson, MS, storage facilities provide a total working capacity of 68 Bcf.

The energy trading business will operate as the Global Commodities group, a wholly owned unit within Merrill Lynch’s Global Markets & Investment Banking Group. The Entergy-Koch Trading management team will continue to run the business at Merrill Lynch.

The acquisition is designed to enable Merrill Lynch to provide a broader product offering to its major institutional clients, which include major corporations around the world, hedge funds and pension funds. Currently, the company has a small-scale energy trading operation, with only a handful of employees. The Entergy-Koch purchase brings in about 280 employees.

The operation to date has focused on natural gas, electricity and weather-related contracts, but Merrill Lynch has said it anticipates making future investments to expand the business into other aspects of energy trading.

In its third quarter earnings, Entergy said its portion of Entergy-Koch led to a loss of 19 cents/share compared to earnings of 18 cents per share in 3Q2003. The loss was attributed to a change in hedge accounting due to the anticipated sale of the operation.

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