Industry Briefs

The NewPower Co., a subsidiary of NewPower Holdings Inc., signed a definitive agreement to acquire the customers and related assets of AES Power Direct, a retail marketing subsidiary of AES Corp. The company has also signed a definitive agreement to purchase the customers and natural gas inventory related to the Columbia Gas of Ohio and Dominion East Ohio gas customer choice programs of CoEnergy Trading Co. CoEnergy is a subsidiary of DTE Energy Co. Together, the deals significantly expand NewPower's presence in Ohio, where the company will add over 82,000 natural gas and electric customers, and in Pennsylvania, where NewPower will add approximately 38,000 natural gas customers. The deal also marks NewPower's entrance into the service territories of four additional utilities: Dominion Peoples, Dominion East Ohio, Toledo Edison and Ohio Edison. NewPower is also entering the gas market for Cincinnati Gas & Electric. As part of the AES Power Direct transaction, NewPower will acquire related natural gas inventory, supply and transportation contracts and infrastructure, including billing and customer service, in Peoria, IL, and Toronto, ON. NewPower will acquire from AES Power Direct and CoEnergy a total of approximately 112,000 natural gas customers in the service territories of Columbia Gas of Pennsylvania, Columbia Gas of Ohio, Dominion Peoples, Cincinnati Gas & Electric, Dominion East Ohio, and Washington Gas Light customers in Virginia and Maryland. In addition, NewPower will add approximately 7,000 AES Power Direct electric customers in the Toledo Edison and Ohio Edison markets.

Iowa Gov. Tom Vilsack signed into law a bill that encourages additional electric power generation in Iowa by making it easier to build new power plants in the state. The bill is designed to remove barriers to build rate-regulated electric generation facilities in Iowa, and allow the state's municipal utilities to join together to finance new power plants. The bill allows construction of new power generation facilities to begin immediately. Vilsack's Energy Policy Task Force will make recommendations for Iowa's long-term energy needs this fall. Vilsack said he in interested in reviewing recommendations on such issues as power purchase contracts, energy efficiency, renewable energy sources and assistance for low-income Iowans. He will also review the impacts of President Bush's national energy policy proposals. Vilsack said he is looking forward to working with legislators in continuing to address Iowa's long-term energy needs.

A ruling in June by a U.S. District Court judge that would require the Interior Department's Minerals Management Service to review lease suspensions offshore California has led the federal agency to delay its scheduled public hearings scheduled this week. MMS had scheduled hearings July 10 and 12 in California on its draft Environmental Impact Statement (EIS) covering proposed delineation drilling offshore Santa Barbara County. MMS said that the dates, times and locations of rescheduled public hearings will be announced "when that information is available," leaving it open ended as to whether the hearings would even be rescheduled. On June 20, U.S. District Judge Claudia Wilken ruled that the MMS and the California Coastal Commission had to review lease suspensions for the 26 undeveloped Outer Continental Shelf oil and gas leases off California (see NGI, July 2). Even though Wilken's decision did not address the proposed EIS, MMS officials said the public hearings had to be postponed until it can complete action that implements the court's order. Wilken's ruling was the result of a lawsuit filed in 1999 against the Interior Department by offshore drilling opponent Gov. Gray Davis, the California Coastal Commission and the California attorney general's office (see NGI, Nov. 22, 1999). The lawsuit, still unresolved, seeks to block extensions of offshore leases that were granted by then Interior Department Secretary Bruce Babbitt. Although there is drilling being conducted offshore California, MMS estimates that there could be as much as 1 Bboe from the currently undeveloped leases.

In a $120 million deal with Enron Corp., EOTT Energy Partners LP has purchased a Texas-based hydrocarbon processing complex and a natural gas liquids storage facility, as well as a liquids pipeline grid system. EOTT also signed a 10-year tolling agreement for production from the hydrocarbon complex and a 10-year storage and transportation agreement to use the pipeline and storage systems with an Enron affiliate. EOTT, an Enron subsidiary, gave the Enron affiliate all existing third party commodity, transportation and storage contracts associated with the sold facilities. Based in Houston, EOTT is an independent marketer and North American crude oil transporter. EOTT COO Dana Gibbs said the term agreements would offer stable cash flow "without commodity market or price exposure." Gibbs said the transaction would increase EOTT's earnings before interest, taxes, depreciation and amortization (EBITDA) by $20 million on an annualized basis.

Calgary-based Advantage Energy Income Fund, which joined the Toronto Stock Exchange May 29, increased its reserve base by 43% last week by acquiring all the shares of an unnamed private oil and gas company for C$57.8 million in cash. The undisclosed acquisition gives gas-heavy Advantage 33% more natural gas reserves, 32% more light oil reserves and 16% more heavy oil reserves. The properties produce approximately 1,650 boe/d, 5,400 Mcf/d and 90 bbl/d of natural gas liquids. Total reserves are estimated to be 7.1 MMboe on an established (proved plus 50% probable) basis, with two-thirds in crude oil and one-third in natural gas. The acquisition, which is scheduled to close July 26, is expected to increase Advantage's established reserve life index by 14% to 8.1 years, said the company. The reserves were acquired at a cost of C$8.17/boe and approximately C$35,200/boe/d. Cash flow is estimated to be C$14.1 million, equating to a cash flow multiple of 4.1. Advantage was known as Search Energy Corp. before it was reorganized earlier this year. The reorganization converted Search into a trust entity that distributes most of its cash flow to trust unitholders. As a trust, exposure is minimized on exploration risk, allowing the company to focus on growth through the acquisition and development of producing oil and natural gas properties. Advantage is managed through a privately held management company controlled by Drader and Gary Bourgeois. Both worked for Enerplus Group before joining Advantage.

Maritimes & Northeast Pipeline (M&NP) said its Point Tupper Lateral is now ready to deliver gas to customers in Point Tupper. The lateral was placed in service June 30. Following construction of a pressure reducing station, M&NP was granted final Leave-to-Open by the National Energy Board (NEB) on June 27. Final commissioning of the facilities took place over the past three weeks. "It is yet another milestone towards our target of establishing a 2 Bcf/d system by 2010 serving markets in the Maritimes, Eastern Canada, and New England," said Phillip Knoll, president of M&NP. The Point Tupper Lateral is 37 miles long and extends from the M&NP mainline to Point Tupper, NS. M&NP closed the purchase of the lateral from Sable Offshore Energy Inc. on June 22. The lateral will serve the Sable fractionation plant, StoraEnso and CGC, Inc. in Point Tupper.

Williams and Barrett Resources announced a schedule for the completion of their planned merger. Barrett has scheduled a special meeting of its stockholders at 9 a.m. MDT Aug. 2 in Denver. The companies expect to complete the merger within one or two days following the meeting. Williams signed the merger agreement on May 7. Terms included a cash tender offer by Williams for 16,730,502 shares of Barrett common stock at $73 per share net in cash, which was completed on June 12. The shares accepted in the tender offer represent 50% of the 33.5 million Barrett shares outstanding. In the proposed merger, each remaining share of Barrett common stock will be exchanged for 1.767 shares of Williams common stock.

In order to strengthen its corporate ties with parent company Tractebel s.a., Cabot LNG LLC announced that it has changed its name to Tractebel LNG North America LLC. Cabot owns and operates the Everett, MA, liquefied natural gas (LNG) import terminal. Subsidiary Distrigas of Massachusetts LLC will not change its name, however. Since being acquired by Tractebel in September 2000, Tractebel LNG North America's (Cabot's) LNG shipments to U.S. ports grew by almost 50% during the first six months of 2001 over the same period in 2000 -- 31 cargoes for the first half of 2001 versus 21 cargoes last year. Construction is well underway to more than double the LNG vaporization capacity at the Everett terminal to 1 Bcf/d in late 2001. This upgrade will enable Tractebel LNG North America to fuel a 1,550 MW power plant. In addition, Tractebel recently secured long-term charters for two brand-new 138,000 cubic meter LNG carriers to significantly bolster its transportation capabilities for many years to come.

Staff at the Texas Public Utility Commission (PUC) next week will hold a workshop related to the need for planning reserve margin requirements. The PUC is examining whether the adequacy of generating capacity reserve margins should be left to market forces, or whether other means should be created to help ensure a minimum reserve margin and, if so, what means should be used. At the workshop, which is scheduled for July 10, PUC staff will seek comment on the capacity markets and reserve margin requirements that have been implemented in other jurisdictions, including the lessons learned and the alternatives that could be implemented in Texas. Commission staff will also seek comment on the relevant policy issues that should be addressed. Questions concerning the workshop should be referred to Richard Greffe at (512) 936-7404.

Chicago-based Peoples Energy announced earnings per share guidance for the third quarter of fiscal year 2001. The company said earnings are expected to be in the range of $0.25 to $0.30 per share for the three-month period ending June 30, 2001, reflecting the effect of weather for the quarter that is 14% warmer than normal and 9% warmer than the same period last year. Despite the negative impact of weather in the third quarter, Peoples expects earnings for the fiscal year to be near the midpoint of the previously announced range of $3.15 to $3.25 per share. Peoples plans to release third quarter earnings on July 27, before the market opens. A teleconference call will be held at 10 a.m. EDT.

Texas-New Mexico Power (TNMP) and Public Service Company of New Mexico (PNM) have signed a long-term wholesale power contract to improve price stability and ensure an adequate power supply for TNMP's firm retail customers. The contract, which runs from July 1, 2001 until Dec. 31, 2006, will provide varying amounts of firm power through 2002 to complement existing contracts TNMP has in place. As those contracts expire, PNM will replace them and become TNMP's sole supplier beginning Jan. 1, 2003. In the last year of the contract, TNMP will need 114 MW of firm power. PNM will supply TNMP's needs from its resource portfolio, including a natural gas-fired power plant PNM plans to build in southern New Mexico. The new plant, located approximately 12 miles west of Las Cruces, is currently scheduled to begin providing 135 MW of electricity in the fall of 2002. The company plans to expand the plant to 220 MW in late 2003. It will be PNM's initial investment in new power supply for the competitive wholesale market.

Pyr Energy Group of Denver has abandoned its 3R West Flank wildcat exploration well in the San Joaquin Basin after it proved non-productive in tests. The well was drilled near a producing well on the East Lost Hills block, but it was determined that the hydrocarbon reservoir could not be reached. Pyr plans to conduct an evaluation of field development before any additional testing. CEO Scott Singdahlsen said that the company was disappointed with the results at the 3R, but would "actively pursue the development of the East Lost Hills discovery."

Calgary-based Kinlock Resources Inc. has closed on the sale of several oil and gas producing properties located in the Pembina, Leduc and Alder areas of Alberta for C$342,000. Net present value of proved plus 50% probable reserves, discounted at 15% and using flat commodity prices, is C$500,500, according to Kinlock. Production is approximately 100 Mcf/d and 6 bbl/d of oil and natural gas liquids. The transaction is non-arm's length because the vendor is a private company controlled by Fiona M.D. Read, an officer and major shareholder of Kinlock.

Sierra Pacific Resources has filed a shelf registration with the U.S. Securities and Exchange Commission to occasionally sell up to 20 million shares of common stock. The parent company of Sierra Pacific Power and Nevada Power utilities said it would use the money for its subsidiaries, debt repayment, general corporate purposes and possible investments.

Denver-based TransMontaigne Inc. has sold two petroleum distribution facilities in Little Rock, AR to Williams Energy Partners LP for $29 million. The proceeds will be used to repay long-term debt. It also is in the final stages to sell its Norco refined pipeline system and associated terminals to Buckeye Partners LP. That transaction is expected to close this month.

Magnum Hunter Resources Inc. has repurchased $10.5 million principal amount of its 10% senior notes due in 2007 in a private transaction, reducing the principal on the notes to $129.5 million from $140 million. The Irving, TX-based company funded the repurchase with its existing commercial bank line of credit, increased by $12.5 million to $125 million recently. With the repurchase, Magnum Hunter said it expected to achieve interest savings of about $500,000 over the next 12 months. Management had pledged to continue its focus to reduce debt and improve the balance sheet, said CEO Gary C. Evans. He said since the beginning of 2000, Magnum Hunter had improved debt-to-equity to 63% from 82%.

Halliburton Co. said that using advanced technology, it is working to complete the first floating production, storage and off-loading facility (FPSO) to operate in North American waters, which will be part of the Terra Nova oilfield offshore Newfoundland. The FPSO is scheduled to be installed this summer in water depths of 300 feet at the oilfield on the Grand Banks, about 220 miles east-southeast of St. John's, 22 miles southeast of the Hibernia oilfield. The environmental uniqueness of the Terra Nova location generated several "firsts" and special design and construction considerations because the oilfield is where icebergs are prevalent and sea conditions pose unique challenges to/for marine installation. Consequently, the Terra Nova FPSO is the first one designed to withstand impact with a 100,000 tonne iceberg. The project also is the first to use open glory holes for the subsea equipment. These glory holes put the subsea equipment below seabed level in order to protect them from scouring icebergs. The owners of the Terra Nova development are Petro-Canada (pperator), ExxonMobil Canada, Husky Oil Operations Ltd., Norsk Hydro Canada Oil and Gas Inc., Murphy Oil Company Ltd., Mosbacher Operating Ltd. and Chevron Canada Resources.

Calpine Corp. announced that its Sutter Energy Center, located near Yuba City, is officially up and running. Sutter is the first major combined-cycle facility built in California in over a decade. The facility is providing 540 MW of electricity to California on a 24 hours a day, seven days a week availability. With development efforts beginning in 1996, the plant is the first facility to be licensed by the California Energy Commission since the restructuring of the state's electric utility market. After approval in the spring of 1999, Calpine began construction in June. Building costs are estimated to be approximately $350 million. During the past several months, the project scheduled two ten-hour shifts, six days a week to get the plant operating as soon as possible in light of the energy crisis in California.

AES Corp. announced that one of its subsidiaries has acquired a majority of the energy assets of Thermo Ecotek Corp., a wholly owned subsidiary of Thermo Electron Corp. The purchase price for the transaction is $238 million in cash, inclusive of $63 million of closing adjustments for the reimbursement of Thermo Ecotek's development expenses since September 30, 2000. The transaction does not include the Mountainview, Riverside, and Delano operating facilities which are located in California. Transfer of those assets remains subject to regulatory requirements associated with the Hart-Scott-Rodino Act review. The 1,056 MW expansion project under construction at the existing Mountainview site was included in Monday's closing, as was 161 gross MW of operating power assets in the United States, the Czech Republic, and Germany, a natural gas storage project in Colorado, and the 210 MW Lake Worth Generation project in construction in Florida.

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