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NEES Puts Northeastern Energy Retailer on the Block

January 24, 2000
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NEES Puts Northeastern Energy Retailer on the Block

With plans drawn up to focus mainly on power transmission and distribution, New England Electric System (NEES) decided last week the time was ripe to start testing the market for its successful retail energy marketing subsidiary, AllEnergy Marketing.

The company will look at all strategic options, including a possible sale. AllEnergy is one of the largest retail energy marketing firms in the Northeast, currently selling gas, fuel oil, propane, and electricity to about 125,000 customers.

NEES President and CEO Rick Sergel said the move underscores NEES's goal to focus on its electricity delivery business. "Since its formation in 1996, AllEnergy already has become the largest unregulated retail supplier of natural gas in the Northeast, one of the region's leading home heating oil companies, and an emerging force in the region's developing competitive electricity marketplace," he said. "We have tremendous respect for the hard work and dedication of the people responsible for AllEnergy's success, and believe this is the best way to ensure that success continues over the long-term."

In September 1998, NEES completed the sale of substantially all of its non-nuclear generating business. As a result, its primary business is power transmission and distribution. In December 1998, NEES announced it would merge with The National Grid Group plc, owner and operator of the transmission system in England and Wales, further solidifying its commitment to its electricity delivery business.

"The Federal Energy Regulatory Commission has made it clear that the future of electricity transmission lies in Regional Transmission Organizations governed by companies' independent of electricity marketing firms," Sergel stated. "Our focus now is on completing the merger with National Grid, continuing to work on being the best wires company in the Northeast, and growing the size of our electricity delivery business. For these reasons, investigating options for AllEnergy makes sound, strategic business sense."

Headquartered in Waltham, MA, AllEnergy has sales offices in Worcester, MA; Windsor, CT; Syracuse, NY; and Middlesex, NJ. Its principal heating oil divisions include PAL Energy in Palmyra, NY, and Griffith Consumers Co. in Cheverly, MD, which serves Washington, D.C. and parts of Maryland, Delaware, Virginia, and West Virginia.

AllEnergy generated revenues of $450 million in 1999. Its assets are estimated at $200 million. According to NEES' third quarter financial report, its unregulated businesses lost $0.08 per share in the first nine months of 1999 compared with $0.20 per share for the same period a year prior and the reduction in losses was primarily due to the growth of AllEnergy.

Last summer, AllEnergy bought Texas-Ohio Gas, Inc. from e prime, the energy marketing subsidiary of New Century Energies. With operations and 3,000 commercial and industrial gas customers in 12 states, Texas-Ohio was among the largest unregulated retail gas providers in the Northeast. Texas-Ohio's annual revenue was $60 million.

NEES has retained Merrill Lynch as its financial advisor in connection with the examination of strategic options for AllEnergy.

Rocco Canonica

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