Cabot LNG Sold To Tractebel for $680M

Cabot LNG, the largest U.S. liquefied natural gas importer and distributor in the Northeast, agreed last Thursday to sell 100% of its assets to Tractebel of Brussels, Belgium for $680 million. The deal will give Tractebel the LNG terminal in Everett, MA, along with 10% interest in a liquefaction facility in Trinidad and Tobago and the LNG tanker, Matthew. The transaction is set to close by the beginning of September.

For Tractebel, which already has a relatively large foothold in the United States as the operator of 20 U.S.-based power plants in 12 states, the acquisition of the Cabot Corp. subsidiary provides it with a 20% share of the Atlantic basin, allowing it to serve the power industry in the Northeast and Mid-Atlantic corridor. The deal also complements TEMI, Tractebel's North American energy trading arm, which is active in the Boston region. Most important, however, is the base that it gives Tractebel to grow in North America.

"We have a fairly aggressive business plan and this is not necessarily the last purchase we will make along these lines," said Philippe vanMarcke, who heads up Tractebel's mergers and acquisitions division as well as its strategic activities. He told NGI that Tractebel plans to concentrate its future growth along the "Boston-to-Richmond" corridor, and also extend its reach into Texas and states in the Southwest. "We plan to concentrate our growth in those two areas."

VanMarcke said no changes will be made in the Boston office, and said that, in fact, Tractebel is looking forward to using Cabot LNG's expertise to continue on its present record of success.

"Our policy is to be multi-domestic," he said. "We (Tractebel) have no specific skills in LNG, and we will rely on Cabot to give us their skills. I see no changes at the present time, and in fact, would say that the employees should expect a rosy future."

A rosy future definitely awaits Tractebel if Cabot LNG's present success is indicated. It received 44 cargoes at its Everett terminal in 1999, up from 18 in 1998, and it expects a 10% to 20% increase in import volumes this year. It has been running at 60% to 70% of capacity.

Earlier this year, Sithe Energies Inc. agreed to a 20-year gas sales and purchase plan valued at more than $4 billion to feed its 1,600 MW Mystic Station in Everett with LNG imported by Cabot (see NGI, Jan. 31). Just this week, Cabot LNG began deliveries to Puerto Rico's new EcoElectrica power facility under a 20-year agreement. The 507-MW natural gas-fired power plant is designed to generate as much as 20% of Puerto Rico's electricity demand. Last year it reactivated its LNG carrier Matthew, and a few months later it began receiving LNG deliveries from the Atlantic LNG export facility in Trinidad, contracting for nearly 240 MMcf/d of LNG, equivalent to 60% of the plant's design capacity.

Cabot LNG --- and now Tractebel --- isn't the only one to benefit from the growing marketplace. The U.S. Department of Energy reported last year that LNG imports were up 56% to 39 Bcf in the first quarter of 1999 compared to the previous year (see NGI, July 19, 1999).

In April, CMS Panhandle Pipe Line Co.'s Christopher Helms estimated that LNG use could take up to 3.5% of the predicted 30 Tcf of gas demand by 2010, and said his company is looking to build LNG trade to the same level as crude oil trading, with Lake Charles, LA serving as the hub for all operations (see NGI, May 1).

Other LNG players are on the horizon, too. Sonat, an El Paso Energy subsidiary, successfully petitioned FERC to re-open the Elba Island LNG import terminal in Georgia. It expects to reactivate that terminal in 2002. In May, Williams Gas Pipeline bought Columbia Energy's Cove Point LNG in Lusby, MD for $150 million (see NGI, May 8), and Williams plans to reopen the terminal also by early 2002.

LNG accounted for about 1% of the U.S. total gas consumption, about 60 Bcf/d, last year, but some predict it could grow to between 5% and 8% if the four existing plants are expanded.

Cabot LNG is a division of Cabot Corp., and is the only active importer and distributor of LNG on the East Coast. Through its subsidiary Distrigas, Cabot LNG imports from Algeria and Trinidad to its marine terminal, and then distributes the gas to utilities, electric power generators, gas marketing companies and industrial end users in New England. It supplies about 20% of the New England gas demand, but it also was in the process of increasing its capacity.

"In the present market circumstances, this acquisition will contribute positively to Tractebel's results from the outset," said Tractebel CEO Jean-Pierre Hansen. "The integration of Cabot LNG will create synergies with the existing LNG and natural gas operations within our group."

Tractebel, which operates as the sole energy arm of French-based Suez Lyonnaise des Eaux, provides all of the corporation's energy activities, including electricity and gas, energy services, engineering and technical installations and waste management, and it has 70,000 employees worldwide. It has about 46,000 MW of power generation either already installed or at an advanced state of development, and 30,000 MW is outside of Belgium. It also operates gas transport networks in Europe, Latin America and Asia.

Carolyn Davis, Houston

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