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RBS Sempra Partners with Abu Dhabi Energy Unit

Eyeing a long-term power market play, RBS Sempra Commodities and Abu Dhabi National Energy Co. (TAQA) last Wednesday announced the creation of a global partnership, TAQA Gen X, and its first downstream joint venture in North America.

The partnership is buying JPMorgan's equity interest in BE Red Oak LLC, which holds a tolling agreement with the merchant New Jersey-based Red Oak power plant, operated by a unit of AES Corp. The purchase amount and terms of the deal were not disclosed.

The joint venture begins with an ambitious goal of seeking to eventually manage more than 10,000 MW of independent generation in this part of the world, its backers said.

Red Oak is an 830 MW combined-cycle gas-fired electric generation plant in Sayreville, NJ, in the PJM Interconnection region. TAQA Gen X said it would not own or operate the plant as that will continue through the AES subsidiary, which has operated the plant since it began commercial operations about five years ago.

Last April Royal Bank of Scotland (RBS) and San Diego-based Sempra Energy completed formation of their commodities-marketing joint venture after the newly created unit bought Sempra Commodities, which has accounted for up to half of the U.S. company's profits. David Messer, the former president of Sempra Commodities, became CEO of the joint venture. RBS Sempra Commodities now is part of UK-based RBS's global banking and markets business unit.

In November Sempra reported a rare loss in its commodity trading business, but its senior executives expressed certainty that the results in the fourth quarter and next year will be back in the black. The trading unit reported a loss of $3 million for the third quarter, compared with profits of $87 million for the 2007 third quarter.

Abu Dhabi's national company is a $23.4 billion global energy operation with a growing asset base that it hopes to further expand in the months ahead. The Middle Eastern nationalized firm indicated that it sought what it called RBS Sempra's "world-class energy and risk management skills."

"TAQA's primary involvement in the joint venture will include long-term strategic decision-making, while RBS Sempra Commodities will provide trading infrastructure and expertise, manage commodity risks associated with the power plant and procure the gas required to operate and dispatch the facility," the Abu Dhabi company said in its announcement.

It quoted former BP executive and now TAQA CEO Peter Barker-Homek as saying the newly announced joint venture with RBS Sempra "reinforces TAQA's strategic objectives of becoming a fully integrated global energy company." TAQA Gen X is designed to "play an active role" in the long-term power market demands in North America, Barker-Homek said.

"We plan on scaling the [joint venture] over time to manage some 10,000 MW of clean-burning, high-efficiency and environmentally friendly power. We believe that together [TAQA and RBS Sempra] we will create a market-leading energy partnership, well equipped to make the most of downstream investment opportunities."

RBS Sempra's Messer said his firm was attracted by TAQA's "world-class operation and asset management experience."

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