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Industry Briefs

Industry Briefs

Gulf Midstream Services (GMS), a partnership between KeySpan Energy Development Co. (KEDC) and Gulf Canada Resources, enlarged its Canadian midstream presence last week by announcing an agreement to buy Barrington Petroleum's 38% interest in the Paddle River gas plant and related gas gathering systems. The $9 million purchase gives the partnership 76% interest in the only plant that will be directly connected to both the ATCO Pipeline system and the Alliance Pipeline. The Paddle River facilities are located 62 miles west of Edmonton, AB. The plant is capable of processing up to 82 MMcf/d of raw sour gas. With current throughput of about 42 MMcf/d, the plant's unutilized capacity represents a significant opportunity, GMS said. "With increased industry activity in the area and the Alliance Pipeline connection, we expect this plant to be an attractive long-term investment for KEDC," said GMS president Jim Bertram.

Altra Energy Technologies Inc. and Junot Systems Inc., an enterprise application integration (EAI) solutions provider, made an alliance to provide gas pipelines with Altra Web as a stand-alone GISB-compliant web-based electronic bulletin board solution. Using Junot's NLINK product to connect Altra Web to existing bulletin boards allows pipelines to streamline GISB compliance. Benefits are improved scheduling and management of pipeline operations data. "This alliance will offer our customers a fast, easy and cost-effective way to establish GISB-compliance while maximizing their investments in their existing back-end databases and systems," said Paul Bourke, CEO of Houston-based Altra. "Altra Pipeline, which provides customers with a complete turnkey solution, was the first software product on the market to achieve GISB product certification. Altra Web provides a solution to those customers that want to retain their existing back-end systems but still need GISB compliance."

Forcenergy Inc. reported a blowout last week on an exploratory well at West Cameron Block 317, located 65 miles south of Lake Charles, LA, in the Gulf of Mexico. The blowout occurred during completion operations, but it has not ignited. All personnel have been safely evacuated from the Marine Drilling Rig No. 4. Well control specialists, including Boots & Coots, arrived on the scene and preparations began to bring the well under control. Marine Drilling, based in Sugar Land, TX, owns the jack-up rig involved in the blowout. Because it was an exploratory well, Russ Porter, a Forcenergy spokesman, said there are no estimates as to how much gas the well could produce. In addition, the situation is still being played out, Porter said, so cost estimates on fixing the problem are not available either. "Right now, we expect to be able to recover the well," Porter said. "Hopefully, this will just be a small incident." The blowout is an addition to the problems that have plagued the company for the past year. In March of 1999, Forcenergy declared bankruptcy. At the time, the company owed $315 million from a $320 million credit facility as well as $50 to $60 million of payables to vendors.

Oneok Inc. closed its $307.7 million acquisition of Dynegy's midstream assets last week, and now is focusing on its other major Midcontinent deal with Kinder Morgan. The assets involved in the Dynegy deal include eight gas processing plants, interests in two other plants and 7,000 miles of gas gathering and intrastate transmission systems in Oklahoma, Kansas and the Texas Panhandle. Current processing plant throughput is 240 MMcf/d with a capacity of 375 MMcf/d. Gas liquids production averages 25,000 b/d, more than doubling Oneok's existing production. About 75 employees will be added to the ONEOK workforce as part of the acquisition. Oneok also has pending a definitive agreement with Kinder Morgan Inc., to purchase all of KMI's gas gathering and processing in Oklahoma, Kansas and West Texas for $114 million. Through the KMI deal, Oneok will assume the operating lease associated with the Bushton, KS, gas processing plant; and assume long-term capacity commitments on Natural Gas Pipeline Co. of America and on Kinder Morgan Interstate Gas Transmission. It represents in excess of 12,000 miles of pipeline, six gas processing plants with capacity of 1.26 Bcf/d and 10.5 Bcf of storage. The deal also includes KMI's (former KN Energy's) entire marketing and trading operation. Closing is expected in a few weeks.

PECO Energy Co. of Philadelphia, PA, submitted a joint petition for settlement to the Pennsylvania Public Utility Commission for its proposed merger with Unicom Inc. The settlement involves nearly two dozen parties. It includes rate reductions and extended rate caps, electric reliability and customer service standards, mechanisms to enhance competition and customer choice, nuclear safety research funds and customer protection against nuclear costs outside of Pennsylvania. Ken Lawrence, PECO Energy Distribution president, said the settlement agreement balances the interests of all parties, contains major customer benefits, avoids extended, costly litigation and is consistent with PUC policies promoting negotiated settlements.

The Edison Electric Institute's Alliance of Energy Suppliers and the National Energy Marketers Association (NEM) recently introduced energy and financial professionals in the Southwest to the new Standardized Master Power Contract for the nation's wholesale electricity market. The Master Contract will help to increase the liquidity of the nation's wholesale power markets by eliminating the array of power contracts and tariffs now being used around the country. The next workshop on the Contract will be held in New York April 25. "Numerous players are participating in today's competitive wholesale power markets," said Richard F. McMahon Jr., Group Director, EEI's Alliance of Energy Suppliers. "Many different contracts and tariffs are in place. This makes trading across the country more risky and complicated. As the Standardized Master Power Contract gains wider acceptance, we will see power transactions simplified with less risk and uncertainty." The contract is available on EEI's Web site at www.eei.org/alliance/new.htm.

Almost a year after it entered Chapter 11 bankruptcy, Houston-based TransTexas Gas Corp.'s reorganization plan took effect as the company arranged $52.5 million in exit financing. TransTexas amended its existing DIP Credit Agreement and Revolving Accounts Receivable Credit Facility, cancelled existing securities and issued new securities. This is the final step in emergence from Chapter 11, which began April 19, 1999. TransTexas voluntarily filed for Chapter 11 and said it expected a successful recapitalization with parent TransAmerican Energy Corp. For the nine months ended Oct. 31, 1998, including the effect of asset impairments of $186.7 million, TransTexas reported a net loss of $155.4 million on revenues of $137.7 million compared to net income of $247 million on revenues of $695 million for the year-ago period, which included a gain of $540.4 million on the sale of the company's Lobo Trend subsidiary. On the effective date of the bankruptcy, existing securities, including a $450 million senior secured note, $115.8 million of subordinated notes and all of its issued and outstanding shares of common stock were cancelled. The company issued $200 million in new senior secured notes, $222.46 million of new senior preferred stock, $20.72 million of new junior preferred stock, 1.250 million shares of new common stock, 625,000 warrants to purchase additional shares of new common stock, and $21.84 million in cash to the holders of the senior secured note claim.

Financially troubled energy producer Coho Energy Inc. announced that after several modifications, its plan for a bankruptcy reorganization was approved earlier this month by the U.S. Bankruptcy Court for the Northern District of Texas. The confirmed plan is anticipated to begin March 31. The modifications include the retention by the common shareholders as of Feb. 7, of 20% of any proceeds from Coho's lawsuit against Hicks, Muse, Tate & Furst as well as 40% of any net sale proceeds from the company's Tunisia permit. Coho is suing the firm because of a failed attempt by Hicks Muse to buy Coho. Also as part of the plan, Jeffrey Clarke, Coho president and CEO, is expected to resign once the reorganization becomes effective. The CEO change results from the request of the majority holders of Coho's 8 7/8% bonds and was not a decision taken by the board of directors, the company said in a statement. Once the reorganization goes into effect, Mike McGovern, a managing director of Pembrook Capital Corp. and formerly CEO of Edisto Resources Corp., is expected to be elected as the new CEO.

Continuing with efforts to shed non-core assets and improve its balance sheet, CMS Energy Corp. announced an agreement last week to sell its 80% ownership of the 236 MW Lakewood Cogeneration venture to Consolidated Edison for $94 million. The sale will result in a $182 million reduction of project debt from the CMS balance sheet. The sale was made to ConEdison's generation subsidiary, Consolidated Edison Development. The deal is subject to FERC review, and the parties expect to complete it in the second quarter. The Lakewood Cogeneration plant, located in Lakewood, NJ, has been operating for several years, said CMS spokesman Kelly Farr. It is the only gas-fired plant on the East Coast that CMS has interest in. None of the plant's gas contracts will be affected. A Japanese firm called Tomen Corp. owns the other 20% of the plant.

Dynegy announced the second phase of development on the Calcasieu Generation Project, a gas-fired peaking facility near Lake Charles, LA. The addition of a 165 MW combustion turbine will be completed during the second quarter of 2001, bringing the power plant's total generating capacity to a nominal 320 MW. Construction on the initial 155 MW phase began during the fourth quarter of 1999. Commercial operation will begin on June 1, 2000. "We've decided to expand the facility's generating capacity in order to meet the rapidly growing demands of the wholesale energy market in the state of Louisiana and throughout the Southeast. If market conditions warrant, this site could potentially see further expansion beyond 2001," said Steve Bergstrom, Dynegy president and COO. The Calcasieu Generation Project is constructed on a 20-acre site within the Rose Bluff Industrial Area near Lake Charles. Gas will be delivered through Koch Gateway and Sabine Pipe Line. Transmission access for power transactions will be delivered via a 230-kV Entergy Services transmission line. In addition, Dynegy announced it signed a five-year power purchase agreement with Cleco Corp., a regional energy services company based in Pineville, LA, to supply up to 310 MW of capacity and energy. The majority will be supplied by the Calcasieu Generation Project.

According to remarks made last week at The New England Gas Association's annual conference, the region's gas industry continues to add customers and new supply capabilities. Growth is reflected in such developments as: 25% growth in the region's pipeline infrastructure over the last year with two new pipelines from Canada - the Portland Natural Gas Transmission System (PNGTS) and the Maritimes & Northeast Pipeline from Nova Scotia; system expansions by the region's transmission and local distribution companies; a new supply of liquefied natural gas (LNG) from Cabot LNG's Atlantic LNG Project, which made first deliveries to New England in May 1999; more gas customers in New England than ever before, more than 2.2 million; and the region's gas utilities reached a new record sendout of gas Jan. 17, reaching 3.4 Bcf, a 13% increase over the previous record.

Energycentric.com of Chicago has formed what it says is the first online business-to-business marketplace dedicated to the equipment and services side of the energy industry --- an estimated $30 billion market. "By applying the strengths of the Internet to the energy equipment industry, Energycentric.com will improve procurement cycles, tighten inventories and extend the buying or market reach of individual companies," said Susan Craft, Energycentric.com founder and CEO. "Based on the experience of other industries, this could mean an estimated industry savings of 20%, freeing energy companies to invest more in their core competencies. "The energy products and services industry is highly fragmented on both ends of the buying and selling process, and we have a technology solution that creates a one-stop digital marketplace, which handles everything from research and planning to procurement and fulfillment."

Group 8760's GISBAgent, was certified by the Gas Industry Standards Board (GISB). GISBAgent is the second product to receive GISB's technical standards certification, which began as a voluntary program in September. "Customers of Group 8760 can now be ensured that the critical elements of GISB's Electronic Delivery Mechanism standards are supported," said Rae McQuade, GISB executive director. GISBAgent is an electronic delivery mechanism for secure Internet transactions. GISBAgent provides data exchange regardless of data format, is browser independent, and is based on non-proprietary, open standards. Group 8760 of Birmingham, AL, is a provider of e-commerce solutions for the energy and healthcare markets.

A partnership between Anadarko Petroleum Corp., Shell and Ocean Energy Inc., announced the successful completion of drilling operations on a field development/delineation well at the 1998 Hickory discovery offshore Louisiana. Construction of the Hickory production platform continues and is on schedule for installation this summer, the partnership said. The platform has been designed to handle 300 MMcf/d of gas and 15,000 b/d of oil. First production from the Hickory Field is scheduled for the fourth quarter of 2000. "This well was drilled in about half the time and at half the cost of what we expected," said John Seitz, Anadarko COO. Anadarko is the operator of the project and owns a 50% working interest in Grand Isle Blocks 110, 111 and 116. Shell owns 37.5% and Ocean Energy owns 12.5%.

Columbia Energy Group has restarted its open market share repurchase program, with the concurrence of NiSource Inc. The program had been suspended since October, when Columbia's board authorized the company's management to explore strategic alternatives to enhance shareholder value. Under the recommenced program, originally authorized by Columbia's board of directors in 1999, Columbia may repurchase up to $300 million of common shares. Columbia and NiSource signed a definitive merger agreement on Feb. 27. The merger, subject to approval by shareholders and regulatory agencies, is expected to be completed by the end of 2000. The repurchase program authorizes Columbia Energy Group to make purchases in the open market or otherwise.

The nation's biggest municipal utility, the City of Los Angeles Department of Water and Power, has signed 27 of its largest customers to discount contracts valued collectively at $1.2 billion over their seven- and 10-year lives. The deals represent about 8% of the departments electricity sales which are projected to be 25 GWh this year, according to Randy Howard, LADWP's manager of the long-term contracts. LADWP on Monday celebrated its latest 10-year, 5% discount deal with the Getty Center art museum and cultural complex as part of energy and environmental joint events at the 24-acre, $1 billion hillside campus tucked on a 110 acres in West Los Angeles. The deal is valued at $2 million, according to LADWP. Last year the large muni utility, which under California's electricity restructuring is not required at this point to open its markets to retail choice, embarked on an aggressive effort to sign its 50 largest customers to long-term deals. Among its 27 deals 23 are for 10-year durations, with the others covering seven-year periods, said Howard, adding that the department has 14 or 15 outstanding offers to some of the other largest customers, and it should wrap up those deals by June 1. The deals represent $134 million of locked-in annual revenue for LADWP, Howard said. The customers vary from major university campuses, such as the University of Southern California, to governmental departments, hospitals, large retailers and business operations.

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