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Industry Briefs

Industry Briefs

The National Oceanic and Atmospheric Administration said in a report issued yesterday that the 2000 hurricane season could be a whopper with 11 or more tropical storms, of which seven or more could become hurricanes, with three or more classified as major. "The greatest influences in this forecast continue to be the on-going La Nina and a lesser-known climate phenomenon of warmer than normal Atlantic Ocean temperatures that affect hurricane activity over very long time scales," said NOAA Administrator D. James Baker. "La Nina is defined by cooler-than-average sea-surface temperatures in the central and eastern tropical Pacific. During last year's hurricane season, La Nina was bold, and clearly defined, and gave forecasters more certainty. This year, La Nina's end is in sight," Baker said. "Even if La Nina fades by August (as the current forecast suggests), La Nina's remnants and other influences will still likely bring more storms than usual," he added.

The Mid-America Interconnected Network (MAIN) said yesterday an audit of ComEd's electric power supply resources shows the company has lined up 22,494 MW, which exceeds MAIN's 15% supply reserve benchmark. ComEd officials also said they expect additional identified resources to be added before June, boosting the utility's reserve margin to more than 16%.

Kinder Morgan Power and Southern Energy Inc. plan to build a 550 MW gas-fired peaking power plant southeast of Little Rock, AR. Construction on the $250 million plant is expected to begin this summer in Pulaski County, with the plant scheduled to begin producing power by April 1, 2002. Gas transportation service for the plant will be provided by Kinder Morgan Inc. subsidiary Natural Gas Pipeline Company of America (NGPL). Southern Company's marketing affiliate will market the electric output.

The New Hampshire Public Utilities Commission approved the acquisition of EnergyNorth, Inc. by Eastern Enterprises and Eastern's merger partner KeySpan Corp., following a favorable review of a settlement between the utilities, the Office of the Consumer Advocate and the Staff of the NH PUC. "The decision of the New Hampshire Public Utilities Commission keeps us on track for completing our merger in the fall," said KeySpan CEO Robert B. Catell. The settlement calls for ENGI's customers to receive a 2.2% rate cut and other future benefits created by the merger. It also allows the utilities to request the amortization of transaction and integration costs, including the acquisition premium, in rates only to the extent that they can demonstrate the benefits of the merger to the customers equal or exceed the amount of the costs proposed for amortization. On July 15, 1999, Eastern agreed to acquire EnergyNorth, owner of New Hampshire's largest gas distributor. On November 4, 1999, KeySpan announced plans to buy Eastern for $64 per share, in a transaction with an enterprise value of $2.5 billion. Terms of the EnergyNorth merger were adjusted at that time to increase the price paid to EnergyNorth shareholders to $61.13/share to reflect the increased price of Eastern stock. Manchester-based EnergyNorth's subsidiaries distribute gas and propane gas to 100,000 customers throughout New Hampshire and Vermont.

The proposed merger of Anadarko Petroleum and Union Pacific Resources moved forward yesterday when the U.S. Federal Trade Commission (FTC) granted early termination of the statutory waiting period required under the Hart-Scott-Rodino Anti-Trust Improvements Act. Completion of the merger still is subject to the approval of the shareholders of both companies and satisfaction of other customary conditions. Under the agreement, which was unanimously approved by each company's board of directors, UPR shareholders will receive 0.455 Anadarko common shares for each UPR common share they own. The offer is worth about $5.6 billion. Anadarko will also take on $2.6 billion in long-term debt from UPR. Closing is expected in July. UPR will become a wholly-owned subsidiary of Houston-based Anadarko. The purchase more than doubles Anadarko's North American gas reserves from 2.5 Tcf to 5.8 Tcf. The increase moves the company from the 13th largest company in terms of North American gas reserves to fifth. The increase of production is even more pronounced, as Anadarko will go from 170 Bcf/year (20th place) by itself to 634 Bcf/year (sixth place).

AltaGas Services Inc. is buying four small gas midstream gathering and processing facilities for a total of $15.7 million. The plants and facilities include the following: 1) an 8 MMcf/d gas plant with fractionation capability located near the town of Brooks in central Alberta and a 36-mile gas gathering system with access to 24 townships. Reserves behind the plant have a life index in excess of 10 years; 2) a 16%, non-operated, working interest in a 10 MMcf/d gas plant and 44 miles of associated gathering lines; 3) a 2 MMcf/d gas plant and 2-mile gathering line located southeast of Edmonton; and 4) a further 15% ownership interest in the Killam North gas plant located in the company's Birch Wavy operating area. With this purchase, AltaGas' ownership interest in this facility will be approximately 70%.

BP Amoco announced the discovery of some 2 Tcf of gas off the southeast coast of Trinidad, the country's first deep-water find. This is BP Amoco's third major gas find offshore Trinidad in the past three years. The discovery was made by the 'Manakin 1' exploration well in block 5b, located 135 miles east of Galeota Point in 730 feet water depth on a large structure that straddles the Trinidad-Venezuela median line. "This new find reinforces the industry's assessment of significant gas potential in this basin and it augurs well for future development from which Trinidad and Tobago will benefit enormously," said Larry Tiezzi, President of the BP Amoco Trinidad exploration business unit. "Trinidad & Tobago is a world class hydrocarbon province and this well result adds another discovery to a long list of successes underpinning our strategy to focus significant resources in this region. We recently agreed a two-train LNG expansion in Trinidad which will treble production to nine million tonnes a year by 2003, at TT$7,000 million the largest single investment in the Caribbean."

Southern California Edison will sell its 56% controlling interest in the Mohave Generating Station to AES Corp. for more than $667 million, a sale that now brings to 15 the number of generating assets SCE has sold within the past three years as part of its marketing restructure plan. SCE market-valued and sold 12 gas-fired California plants in 1997 and 1998 through an auction process, similar to one used for the Mohave sale announced yesterday. The Mohave station, located in Laughlin, NV, will continue to be operated and maintained by SCE for two years in accordance with AB 1890, California's electricity market restructuring law. The remaining interests in the Mohave facility are owned by the City of Los Angeles Department of Water and Power, which owns 20%, and the Salt River Project, which owns 10% of the facility. AES will acquire SCE's interest in the two-unit, coal-fired plant, which represents about 885 MW of the coal plant's 1,580 MW generating capacity. The transaction still must be approved by the California Public Utilities Commission and FERC, and reviewed by the Public Utilities Commission of Nevada, and if all goes as planned, the sale will close by November, according to company officials.

A unit of Williams has agreed to provide various amounts of energy and capacity to Old Dominion Electric Cooperative beginning in the fourth quarter of 2001 in a heat rate call option and capacity sale announced yesterday. Williams' energy marketing and trading unit had been selected by the Glen Allen, VA cooperative as part of its 1999 Request for Supply Proposals in late 1999 to meet the needs of members in Delaware, Maryland and Virginia. The capacity sale will be supported primarily by the 700-MW Ironwood generating facility in South Lebanon Township, PA.

Forest Oil Corp. announced the completion of the Liard pipeline and initial production from the P-66A Well in the Northwest Territories. Production rates are anticipated to increase gradually during the next several weeks to a target rate of 35 to 50 MMcf/d, resulting in net sales of gas by Forest of 15 to 20 MMcf/d. Production is being transported and processed through the Westcoast system. Based on current prices, processing and transportation fees, and production costs, the netback for the production from this field is US$2.25/Mcf, the company said. Production from the Fort Liard area is the first new gas to be brought on stream in the Northwest Territories since the Pointed Mountain field in the early 1970s. Forest has achieved production within 40 months of its initial participation in the Flett exploration program. This represents a significant achievement considering the remote location and lack of infrastructure in the area. It is expected that substantial reductions in cycle times will be achieved as a result of the company-owned facilities now in place.

AmeriGas Partners, L.P. acquired substantially all of the propane distribution assets and business of All Star Gas Corporation in five western states. All Star Gas markets over 18 million retail gallons annually from 26 locations in California, Idaho, Nevada, Oregon and Washington. Terms of the transaction were not disclosed. "The acquisition of the operations of All Star Gas brings the total sales volume acquired this year to 26 million annual gallons, exceeding our commitment to add 15 million gallons annually to AmeriGas through the addition of quality businesses with talented people," said AmeriGas CEO Lon R. Greenberg.

AIG Financial Products Corp. and Enron Investment Partners Co. have acquired minority stakes in TreasuryConnect, a transaction execution system for financial products traded between corporations and banks. Bruce Usher, co-founder and president of TreasuryConnect, said he was "extremely pleased" with AIG's and Enron's investment in his company, and said that "it reflects favorably on our technology and its ability to improve trading and operational efficiency." Even though it domestically transacts more than $6 trillion a year, the interest rate and currency swap market is one of the last markets to migrate to the Internet because of the relative complexity of derivative products, and the subtleties of the trading process, according to Usher. TreasuryConnect, with offices in New York City and Los Angeles, offers an Internet-based trading platform specifically designed for financial transactions between banks and corporations. It also offers direct back office links for straight through processing, documentation solutions, historical data, research and analytical tools to facilitate trading. AIG Financial is a wholly-owned subsidiary of American International Group Inc. and Enron Investment is a wholly-owned subsidiary of Enron Corp.

More security. More electronic commerce solutions. More flexibility. Those are a few of the reasons that e-commerce leader Altra Energy Technologies Inc. announced yesterday it will upgrade its Internet web-based services by using Extensible Markup Language, or XML, to integrate its AltraWeb Product. XML is a precise, cutting-edge version of its forerunner, hypertext markup language (HTML), the basic language used to communicate on the World Wide Web. XML differs from HTML in that it offers businesses a more flexible way to add graphics and information options on their web sites, with structured data that is uniform and independent of applications or vendors. By using XML over more basic web languages, Altra will be able to improve its security, and offer more efficient e-commerce solutions. Altra, together with its subsidiaries, has become a leading provider of transaction management software and electronic commerce solutions for buying, selling and transportation of energy. It operates Altrade T, a leading independent online trading exchange for the wholesale energy industry.

To assist in the growing demand for electricity in the upper Midwest, Southern Energy Inc. plans to begin construction this month of a natural gas-fired plant in Zeeland, MI that will use advanced natural gas combined-cycle technology and state-of-the-art emission control equipment. Commercial operations are expected to begin in June 2001, with an initial 300 MW of capacity. An additional 530 MW will begin commercial operation by June 2003. When the Zeeland facility begins operation along with the recently announced 550-MW plant in Arkansas, the power-generation capacity owned or controlled by Southern Energy will top more than 10,000 MW in the United States. The plant's output in the wholesale power area will be marketed by Southern Company Energy Marketing, the energy marketing and risk management unit of Southern Energy.

Merrill Lynch has been hired to serve as Avista Labs' investment bank and strategic adviser to evaluate the best ways to maximize the shareholder value of its fuel cell technology. Avista Corp. of Spokane, WA made the announcement yesterday, and said that Merrill Lynch will "consider all possible options, including financial restructuring and an initial public offering." Avista Labs recently received a comprehensive patent securing the exclusive modular design of its PEM fuel cell system, a "plug and play" feature that allows fuel cell cartridges to be easily removed and replaced without interrupting power. The Labs arm of Avista Corp. is a joint development agreement with UOP to integrate its fuel cell with the natural gas and propane fuel processor systems of UOP. Later this year, field testing will begin for the integrated units of UOP. Currently, Avista Labs is testing its fuel cell subracks in several locations across the country, including Arizona Public Service in Phoenix, the Fuel Cell Test and Evaluation Center in Johnstown, PA., Tyndall Air Force Base in Panama City, FL, and as back-up power within the Avista Utilities service territory in the Pacific Northwest.

Southwest Gas Corp. has requested a $37.1 million general rate increase with the Arizona Corp. Commission. General rate applications deal with the company's costs of operating its distribution system. If approved as requested, the rates would increase average monthly residential bills about $3.63, with an average bill increasing to $30.10. Roger Montgomery, Southwest's vice president/pricing, said the proposed monthly bill would be comparable to a bill paid by customers in the early-to-mid 1980s. Later this year, he said that Southwest plans to remove a one-time gas cost surcharge which would then reduce the average residential monthly bill proposed in the application by $1.84. Southwest stated in its application that even though it has had success in controlling costs and increasing productivity, it has been unable to earn the rate of return authorized by the commission because of several factors: inflation, declining average residential use and financing costs to meet the growth demands of the Arizona's growing residential sector. Southwest also wants to shift more of its day-to-day operating costs to the basic service charge to reduce the impact of weather on monthly bills.

It's taken just eight months since its discovery, but Mariner Energy Inc. says that the Apia Project, a deep-water Gulf of Mexico single subsea well, is completed and is producing nearly 40 MMcf/d of natural gas. Located in Garden Banks block 73, the well is producing at a water depth of 700 feet, connected to a host platform three miles away. Mariner officials also announced last week that a production test has been completed at its Black Widow deep-water Gulf discovery, located in Ewing Bank block 966 at a water depth of 1,840 feet. The subsea well tested at restricted daily rates of 6,500 barrels of oil, and 6.3 MMcf/d of gas through a 32/64th-inch choke with a flowing tubing pressure of 4,362 pounds per square inch.

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