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Kinder Morgan Inc. (KMI) is moving forward with consideration of a buyout offer from company management. The company said the special committee of its board of directors formed to consider a management-led buyout proposal has retained Morgan Stanley and The Blackstone Group as its financial advisers and Skadden, Arps, Slate, Meagher & Flom LLP as its legal advisor. CEO Richard Kinder has proposed a $100/share buyout of KMI (see NGI, June 5), owner of the general partner in Kinder Morgan Energy Partners (KMP), which is developing the Rockies Express pipeline. Several law firms have initiated class action suits that allege the $100/share buyout offer is too low (see NGI, June 12). Others have speculated that KMI will attract a competing offer. The board's special committee also has been authorized to evaluate alternative proposals that may be received from other parties. The company said there is no guarantee a transaction will be completed with the Kinder-led party or anyone else.

Constellation Energy said last week that its new limited liability subsidiary, Constellation Energy Resources LLC, which focuses on the gas production and midstream business, filed a registration statement on Form S-1 with the Securities and Exchange Commission Wednesday regarding a proposed underwritten initial public offering (IPO) of common units. Constellation Energy Resources LLC plans to sell up to 6.05 million common units representing Class B limited liability company interests in the IPO. After the IPO, Constellation Energy Group will continue to own about 56% of the company. It will use the proceeds from the IPO for working capital and to reduce borrowings. Constellation plans to list its stock on the New York Stock Exchange under the symbol "CEP." Constellation Energy Resources was formed in February 2005. The company's assets are located exclusively in the Robinson's Bend Field in the Black Warrior Basin of Alabama. Citigroup Global Markets Inc. and Lehman Brothers Inc. will act as joint book-running managers and representatives of the underwriters. This offering of common units will be made only by means of a prospectus, which can be obtained from Citigroup Global Markets Inc. or Lehman Brothers. A registration statement has been filed with the SEC but has not yet become effective. Constellation's primary subsidiary is Maryland-based Baltimore Gas & Electric. Constellation also is the nation's largest competitive supplier of electricity to large commercial and industrial customers and the nation's largest wholesale power seller. The company owns 100 generating units located throughout the United States, totaling 12,000 MW of capacity.

Williams Cos. has announced an agreement in principle to pay $290 million to settle class-action lawsuits that were filed on behalf of purchasers of Williams' stock between July 24, 2000 and July 22, 2002. The original lawsuit, filed in January 2002, alleged Williams made "material misrepresentations to the markets" to inflate its stock price (see NGI, Feb. 4, 2002). Williams and various other parties to the agreements did not admit to any liability by the company, its directors or officers. In addition, there were no findings of any violation of federal securities laws. Subject to court approval, Williams said the settlement will be funded through a combination of insurance proceeds and cash on hand and will not have a material effect on the company's liquidity position. Williams expects to pay $145-220 million in cash to fund the settlement, with the balance funded by its insurers. Williams said it would record a 2Q2006 pre-tax charge in the same range as its expected cash outlay. On an after-tax basis, the charge is estimated to be $98-148 million, or 16-24 cents/share. The charge will be nonrecurring. The agreement is exclusive of the company's litigation with plaintiffs representing a class of Williams Communications securities purchasers. That lawsuit is pending in U.S. District Court for the Northern District of Oklahoma.

South Carolina Electric & Gas Co. (SCE&G), which provides natural gas to about 294,000 customers, has requested an overall 3.26% increase to its gas base rates from the Public Service Commission of South Carolina (PSC). The filing is the SCANA Corp. subsidiary's first under a 2005 state law designed to reduce the volatility of customer rates by allowing for recovery of costs associated with maintaining and expanding infrastructure. The statute requires South Carolina's regulated gas utilities to make quarterly filings with the PSC and the South Carolina Office of Regulatory Staff (ORS) showing actual investments, revenues and expenses. Each year, the ORS will review SCE&G's financials for the 12-month period ending March 31. If the company's actual return on equity (ROE) for that period was more than 0.50% above or below the 10.25% return authorized by the PSC, SCE&G is required to file for a rate adjustment to bring earnings back to that authorized rate of return. In the filing for a rate increase, SCE&G declared an ROE of 4.38% for the 12-month period ending March 31. The information supporting SCE&G's filing will be reviewed by the ORS, which will issue an audit report by Sept. 1. The PSC will then review SCE&G's filing and the ORS audit report and will issue an order in October. The rate adjustment would be implemented with the first billing cycle of November 2006. The adjustment represents about $7/month on the average winter heating bill for residential customers, who would see a 4.24% rate hike. Small and medium commercial customers' bills would rise 2.83%, and large commercial/industrial customers would see a 1.96% rate hike.

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