Coral to Help Manage KeySpan's Supply, Assets
Coral Energy won a two-year contract last week to manage the
supply and upstream natural gas assets of KeySpan Energy, the
parent company of the nation's fourth largest gas utility Brooklyn
Union, which serves 1.6 million customers in New York City and Long
Island. The deal also covers the fuel supply for KeySpan's 6,000 MW
of electric power generation on Long Island. Financial terms of the
deal, which became effective April 1, were not disclosed. The
contract was awarded following an 11-month review of competitive
bids from multiple marketing and trading companies.
"KeySpan is extremely well positioned in the Northeast, and
creating this relationship with Coral presents tremendous
opportunities for both companies," said Charlie Crisp, CEO of Coral
Energy. "The powerful collaboration of KeySpan's supply assets and
their knowledge of the Northeast markets and our marketing and
trading expertise will result in higher returns for both of us."
Coral will work directly with KeySpan Energy Trading Services to
maximize the value and minimize the net cost of $1.6 billion in
KeySpan purchases and upstream utility assets, which include
natural gas pipeline transportation and storage, fuel oil
purchasing and storage, and the sale of emissions credits.
The arrangement replaces and covers a wider span of operations
than the $500 million contract KeySpan subsidiary Brooklyn Union
(BU) signed with Enron in 1998, KeySpan spokesman Robert Mahony
said. However, unlike the Enron deal, Coral will not be taking
control of BU's assets (capacity on six pipelines, 36 Bcf of
working storage capacity and one LNG plant with 1.5 Bcf of storage)
nor its supply contracts, which cover about 200 Bcf/year (nearly
550 MMcf/d) of gas with 50 suppliers.
"By switching from the Enron deal to this one, we gain
flexibility," said Robert Brown, a KeySpan spokesman. "We now can
leverage our own assets, which is the goal we wanted to achieve
considering all the new initiatives at KeySpan and in the energy
Coral will be assisting KeySpan in managing BU's supply and
upstream gas transportation. Coral was quick to point out that this
agreement is not an outsourcing deal. "This is an alliance in which
we will put Coral people in the energy management offices of
KeySpan, to help them with energy decisions," said Jimmy Fox, a
Brown did not disclosed whether this deal included added supply
agreements. Coral and its parent, Shell, have supplied gas to
KeySpan for 13 years. During the past two years, Coral has also
assisted BU with asset management and risk management.
KeySpan CEO Bob Catell said, "By leveraging KeySpan's regional
assets with Coral's national market network we can increase savings
for our gas customers and, under our regulatory agreement approved
by the New York Public Service Commission, we can realize a portion
of those savings for the benefit of KeySpan's shareholders."
Under Brooklyn Union's prior agreement with Enron, the marketing
company promised savings of $10 million/year. Expected savings from
the deal with Coral were not disclosed.