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France's EDF: Eagle Energy Complements LNG Business

Electricite de France is buying Houston-based gas and power marketer Eagle Energy Partners from bankrupt Lehman Brothers Holdings Inc., EDF Trading Ltd., a subsidiary of the French utility giant said last Monday, noting that the acquisition enhances its liquefied natural gas (LNG) capabilities.

EDF Trading is a leading European gas trader and one of the first traders to move into the global market for LNG, the company's website says. The firm is EDF's interface to wholesale energy markets in France and the United Kingdom.

"We are impressed by Eagle's management and staff, their customer focus and market knowledge," said EDF Trading CEO John Rittenhouse. "Eagle will become the centerpiece of [EDF Trading's] wholesale operations in North America. This acquisition is consistent with EDF's strategy of optimizing its gas supply in the global LNG market."

Among Eagle's largest customers has been prolific gas shale producer Chesapeake Energy Corp., whose CEO Aubrey McClendon has expressed interest in exporting U.S. gas in the form of LNG to world markets (see NGI, Aug. 4). Chesapeake also is a former one-third owner of Eagle.

The French trading firm says it is one of the largest traders of gas in northwestern Europe and it has a network of physical assets and a portfolio of long-term contracts. The firm trades on all of Europe's active gas trading hubs -- the main ones being Belgium, France, Holland and the United Kingdom. EDF Trading also is active in developing hubs in Germany, Switzerland, Italy and Austria and in the financial gas markets in the United States.

"EDF Trading supports developing markets such as Eastern Europe," according to the company's website. "We were also recently granted a license to trade natural gas in Spain where there are opportunities to improve market liquidity, optimize gas supply...

"Our LNG trading activity supports our wholesale gas pipeline business in North West Europe, as well as helping diversify the gas supply for EDF's gas-fired power plants and growing customer base."

The French firm has regasification capacity at the Montoir terminal in France as well as a "significant" LNG supply agreement with Qatar's RasGas, with LNG delivered through Belgium's Zeebrugge terminal. "This complements activities throughout the EDF Group, including the launch of studies for a regasification terminal at Dunkirk, France; the Rovigo terminal under construction in Italy; the study of the Rosignano project also in Italy; and a preliminary agreement with an LNG project in the Netherlands," the company's website says.

Bentek Energy LLC recently noted in a pipeline capacity report that Eagle holds 60 transportation contracts on 12 pipelines and storage facilities for a total maximum daily quantity of 1.2 MMDth/d. "Over half of that total is on TransCanada's ANR system, associated with market-area storage capacity," Bentek said. TransCanada was one of numerous intervenors in the Lehman bankruptcy and sought to block the sale of Eagle to Barclays because the transaction might have given Barclays the ability to reject Eagle contracts even though Eagle itself has not declared bankruptcy.

Lehman acquired the two-thirds of Eagle that it did not already own in May 2007 (see NGI, May 14, 2007) after it acquired its first third of Eagle in 2006 (see NGI, April 3, 2006). Eagle was formed by former Dynegy executives in 2003 (see NGI, July 7, 2003).

"Eagle is a well established North American wholesale energy transportation, gas storage and optimization services business," EDF said. "It is a large provider of market services to the wholesale gas and power sectors in North America."

Eagle, primarily a physical trader of gas and power, specializes in energy logistics and asset optimization including balancing and matching customer supply and demand; optimizing gas storage and transportation and power generation assets and providing financial risk management products. Eagle did not respond to interview requests from NGI.

No price was disclosed, and the deal is subject to regulatory and approvals.

Eagle's future had been in question since the company was excluded from a deal in which Barclays Capital Inc. acquired Lehman Brothers Inc. for $1.75 billion. The removal of Eagle from the Barclays deal came among several other changes prior to its approval by a bankruptcy court judge in September (see NGI, Sept 29).

Eagle is just the latest enterprise to be targeted by EDF as the international conglomerate seeks bargains in an energy patch rocked by troubles on Wall Street and beset by credit worries. EDF made a competing offer for Constellation Energy Group after a bid for the company was announced by MidAmerican Energy Holding Co. EDF International, a subsidiary of EDF SA, submitted a joint offer of $35/share together with Kohlberg Kravis Roberts & Co. LP and TPG Capital LP (see related story). EDF also has made a $22.9 billion bid for British Energy Group Plc, which among other things is the United Kingdom's largest producer of nuclear power.

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