American Electric Power (AEP) has agreed to pay Enron Corp. $115 million for all of Enron’s interests in the 7,000-acre underground Bammel gas storage reservoir near Houston and related pipeline and storage assets, including 10.5 Bcf of gas in the storage field.
The deal is part of a settlement agreement that resolves a business relationship that was muddled by the Enron bankruptcy. In June 2001 AEP purchased Houston Pipe Line Co. from Enron and entered into a 30-year pre-paid lease arrangement for Bammel. Enron filed bankruptcy six months later and the lease became part of the bankruptcy proceedings.
The purchase includes the related Bammel Loop, Texas Loop and Houston City Loop pipelines, appurtenant wells, compressors and other equipment. AEP and Enron will mutually release the other from all claims associated with Bammel and the related assets. The parties’ respective trading claims are not covered, however.
The proposed settlement also is subject to bankruptcy court approval and may require certain federal or state regulatory clearance.
“This is a significant step that puts the non-trading exposure risk from Enron’s bankruptcy behind us,” said AEP Chairman Michael G. Morris. “Once the settlement agreement gains necessary approvals we will have title to the Bammel storage reservoir and related pipeline assets, which are important to the operation of Houston Pipe Line.” Houston Pipe Line includes approximately 4,000 miles of natural gas intrastate and gathering pipelines.
The proposed settlement does not cover AEP’s lawsuit in Texas federal court against Bank of America, claiming fraud, breaches of contractual covenants and negligent misrepresentations by Bank of America in connection with AEP’s purchase of the Houston Pipe Line stock, the Bammel storage lease and related contractual agreements. Bank of America claims a security interest in 55 Bcf of cushion gas in the Bammel storage reservoir.
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