Carolina Power Buys NC Natural Gas for $354 M
Seeking to become a "one-stop" energy shop and a larger regional
energy company, Carolina Power and Light (CP&L) announced its
initial entry into the gas industry with the acquisition of North
Carolina Natural Gas (NCNG) through a stock-for-stock transaction
worth $354 million. The agreement is still pending state regulatory
and shareholder approval, so no closing date has been announced.
The acquisition reflects the strategy CP&L announced last April
to become "an organization with the potential to be a one-stop
shopping service for our customers."
CP&L CEO William Cavanaugh III said the purchase is a logical
fit. "We have plans for significant additions of gas-fired power
plants over the next 10 years to meet our customers' needs. Access
to a competitively priced gas supply is integral to our long-term
strategy," he said. "To better serve our customers, we plan to
create a larger regional platform from which to expand our
energy-related products and services throughout the Carolinas and
Calvin Wells, NCNG CEO, shared Cavanaugh's bullish sentiments.
"NCNG will benefit by being part of a larger organization in a
"The ironic thing about our first move into the industry," said
Mike Hughes, a CP&L spokesman, "is that in 1952, we bought all
the energy assets of a company called Tidewater, except their gas
assets. After that, those gas assets spun off and turned into
NCNG." Hughes added that CP&L is still looking to expand gas
assets through more acquisitions, strategic alliances, or mergers.
Cavanaugh noted NCNG has enjoyed a strong customer growth rate
over the last few years -- about three times the national industry
average. "[W]e believe there is even more opportunity to increase
the penetration of gas to customers in our service area. our
overlapping service areas will provide increased growth
opportunities between the two operations."
Before this agreement, CP&L provided power and electric
services to 1,153,000 customers in 30,000 square miles of central
and eastern North Carolina. Now gas enters the picture. On the Lee
Steam Electric Plant in Wayne County, Carolina Power expects four
gas-fired combustion-turbine generators to be on line by mid-2000.
These generators will be powered by NCNG and will provide 686
additional megawatts of power to customers. Other gas-fired plants
under construction include two peaking plants near Ashville NC,
which will add an extra 160 MW each to a coal-fired base load
plant. Since these plants are in the western part of the state,
NCNG will not provide their gas, and CP&L has not announced who
Last week's agreement calls for each common share of NCNG to be
converted into CP&L stock at an exchange rate of $35 divided by
the average price of CP&L stock in the 20-day period before the
transaction's end date. Terms prohibit the shares' value from
exceeding $0.8594 or falling below $0.7359. CP&L will pay NCNG
shareholders $354 million to complete the deal. The gas company,
which serves 173,000 customers in 42 out of 100 counties in North
Carolina, will be operated as a wholly owned subsidiary of the
Raleigh-based power company.
Both sides hope the regulatory issues will be taken care of in
six months. Wells will remain CEO of the subsidiary, report
directly to Cavanaugh, and participate on the CP&L senior
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