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Houston Industries Gives Nod to Gas-Power Convergence

Houston Industries Gives Nod to Gas-Power Convergence

The move by Houston Industries (HI) last week to reconfigure its business to meet the demands of gas and power convergence follows recent actions to build up its power generation division. HI formed Houston Industries Wholesale Energy Group to combine its power generation, gas transportation, and wholesale energy trading and marketing capabilities of the company.

"Houston Industries is positioned to compete across the energy chain, and capturing the value creation opportunities that exist between our businesses is a key part of our corporate strategy. Nowhere are those opportunities more pronounced than they are between our power generation business and our wholesale energy trading and marketing business," said Steve Letbetter, HI president. "This consolidation of two previous business groups, Houston Industries Trading and Transportation (HITTG) and Houston Industries Power Generation (HIPG), positions us to be a leader in this rapidly evolving 'upstream' industry.'"

The HI Wholesale Energy Group will be led by Charles Oglesby, CEO, and Joe Bob Perkins, president and chief operating officer. Oglesby had been president and chief operating officer of HITTG where he was responsible for interstate pipelines, natural gas gathering and wholesale energy trading. Perkins had served as president and chief operating officer of HIPG where he was responsible for all of HI's domestic power generation activities and assets.

"We have jointly been developing strategies and pursuing opportunities with early success - this combined organization will be in an even stronger position to compete across the upstream energy chain where we are already one of the leading players," said Oglesby. "It will build on the close working relationships already demonstrated in our successful California generation and trading operations as well as the coordinated development efforts behind several announced greenfield projects."

Perkins ranked HI among a handful of what he considers major players competing in the wholesale sector: Duke Energy, Enron, PG&ampE, Southern Company, and Williams. "What we're saying is we're already among that top group. What we're committed to do is to take it to the next level. In the case of gas and electricity, it's clearly one business for us."

Going forward, HI's efforts should be more coordinated, Oglesby pointed out. Previously, separate parts of the company worked together to bring deals to fruition. Now, these areas of HI will be operating under one umbrella organization.

The new HI Wholesale Energy Group represents 17,800 MW of generating capacity and 1,400 MW of projects under construction or development as well as 8,200 miles of interstate gas pipeline and 4,000 miles of gathering pipeline. Wholesale trading volumes total 4.0 Bcf per day of gas and 80 million megawatt-hours of electricity annually, making the company a top-10 marketer in both gas and power.

In April, HI Power Generation completed the $237 million acquisition of four gas-fired generating plants with 2,276 MW of capacity from Southern California Edison. In March the company announced plans to buy SoCal Edison's Ormond Beach Generating Station, which has two gas-fired units and 1,500 MW of capacity, for $43 million.

Joe Fisher, Houston

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