Moving ahead with its strategy to focus on southwestern andwestern markets, Aquila Energy announced yesterday it has purchasedU.S. Gas Transportation (USGT) for an undisclosed price. Bothcompanies expect the deal to close by the end of the month.

Under the terms of the agreement, USGT will operate as an Aquilasubsidiary called USGT/Aquila, LP. None of USGT’s 20 employees areexpected to be affected. The marketing company will remainheadquartered in Dallas.

Because its main public relations people were at the HoustonEnergy Expo, USGT was unable to produce its 1999 gas sales volumes.For 1998, however, the company earned revenues of $500 million fromits gas sales operations. Aquila is one of the nation’s top gasmarketers, selling 10.4 Bcf/d in 1999 and 9.6 Bcf/d in 1998.

“[Aquila] has made no secret of the fact they will enlarge theirmarketing base if they find an attractive price,” said Ed Tirello,an analyst with Deutsche Banc Alex. Brown. “They are just followingthrough with that strategy.”

Al Butkus, a spokesman for Aquila, said the purchase increasesthe company’s marketing activities in Texas. “Traditionally, Aquilahas been a Midcontinent marketer. We’ve had operations in Texas,and this play will strengthen those operations.”

Following the acquisition, Nanci Mackenzie, the currentpresident of USGT, will become president of USGT/Aquila and willoversee the company’s daily operations. Her husband and businesspartner, Len Mackenzie, will remain a USGT/Aquila executive vicepresident and provide marketing support to Aquila’s President, EdMills.

In a separate transaction that was also announced yesterday,USGT sold the real estate and the rights to a potential 6 Bcf saltdome storage facility in the West Texas Permian Basin. This dealwas completed in February, Butkus said. “We bought the rights toexplore the option of whether we should build the facility. It’s inthe extreme preliminary stages right now. We don’t even have anycost estimates yet.”

If Aquila does decide to build the storage field, it will markthe second major storage play for the company in Texas. Last year,Aquila bought the Katy Hub from Western Resources for $100 million.The company said that its interest in storage capacity in Texas hasincreased in the past year since state lawmakers passed energyderegulation legislation that requires power plants to be fueled50% by natural gas.

“USGT provides us a good strategic advantage in a marketplacethat is becoming more competitive,” said Mills, referring to theSouthwest and California regions. “USGT also brings to us excellentrelationships in a growing market segment.”

Besides its ability to access strategic market areas, the USGTplay also fits into Aquila’s plan of increasing the presence of itsnon-regulated assets. In a speech given last month, Richard C.Green, Jr., the CEO of Utilicorp United, Aquila’s corporate parent,said the company aims to leverage its regulated assets in order tobolster its unregulated operations. “Some companies may have reliedtoo much on trading to make a profit as opposed to sellingsomething to the customer that has a market value you can put inyour pocket,” Green said in his speech. On the natural gas sideparticularly, “the market has reached maturity, so we’re takingmarket share from others.”

©Copyright 2000 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.