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Enron-led Group Buys Columbia's Retail Marketing Operations

Enron-led Group Buys Columbia's Retail Marketing Operations

Columbia Energy Group announced last Friday it is stripping off another of its unregulated assets prior to its merger with NiSource Inc., with a definitive agreement to sell its retail energy mass marketing operations to The New Power Company, a retail venture recently launched by Enron, with help from IBM and America Online (see NGI, May 22).

It is the second bite at the apple for Enron, whose Enron North America unit purchased Columbia's much reduced wholesale trading operation in January for $38.3 million. In that deal Enron became the primary wholesale provider to Columbia's retail operations and the primary buyer of Columbia Natural Resources' Appalachian production into early 2001. Also included was a package of gas already in storage and most of the division's contracts for gas, power, storage, transportation, and asset management.

Under the terms of the new agreement, The New Power Company will acquire Columbia's retail gas and power, mass marketing business, and Columbia will maintain a small, minority equity interest in the business. Columbia's mass marketing operations currently serve approximately 300,000 retail energy customers in eight states. The transaction is expected to be completed by late summer or early fall.

The New Power Company was publicly launched May 16 as a national residential and small business energy provider serving markets where natural gas and electricity are deregulated. Strategic partners and investors in the venture include Enron Corp., IBM and America Online, Inc. Enron is expected to have about a 60% stake in the company through value-in-kind investments, such as providing energy commodity pricing, risk management and government regulatory affairs. IBM is building the corporate infrastructure and website and will man the call center. AOL will give the New Power Co. access to its 22 million customers for six years.

The Columbia retail operations will provide the new company with a base of retail customers. Enron had virtually abandoned its early retail customer efforts as utilities and state governments succeeded in slowing the deregulation process, making it uneconomic for outside marketers in many states. Columbia's main retail success has been in Ohio where it has a large distribution company, Columbia Gas of Ohio, which opened up its market.

Oliver G. Richard III, CEO of Columbia Energy Group, said that although the company is selling the non-regulated retail marketing operations, reflecting its decision to concentrate on other aspects of the energy business, Columbia remains focused on providing customer choice programs for residential and small business customers in its distribution territories.

Since 1995, Columbia's local natural gas distribution companies have worked in a collaborative process with regulators and consumer groups to create customer choice programs. Of Columbia's 2.1 million distribution customers, customer choice programs are currently available to nearly 1.7 million, with nearly 640,000 customers enrolled. By the fall of 2000, customer choice will be available to some 1.9 million customers in all five of Columbia's local distribution states.

Columbia Energy Group is on track for a merger with NiSource Inc., which was approved by the shareholders of both companies in early June and is expected to be completed by the end of the year (see NGI, June 5).

In the last two months Columbia has sold its expanding Cove Point LNG facilities to Williams for $150 million, and put Columbia Propane Corp. and Columbia Petroleum up for sale (see NGI, May 29).

Ellen Beswick

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