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Industry Briefs

Industry Briefs

Kinder Morgan Power Co., a wholly owned subsidiary of Kinder Morgan Inc. announced plans to build a 550-MW electric power plant in Jackson, MI. All the necessary regulatory permits and approvals have been obtained, and construction on the $250 million natural gas-fired plant will begin this month. Operations begin in June 2002. CEO Richard D. Kinder said the Jackson station will be the second in a series of electric power plants that Kinder will build using its proprietary Orion configuration. The Orion projects use gas and steam turbine generator sets and auxiliary equipment provided by General Electric's S&S Energy Products. Kinder said that electricity demand has increased nearly 35% in the state in the past 10 years, but no additional power plants have been built. Michigan imports some of its electricity from other states. The Jackson plant will operate during intermediate- and peak-demand periods to provide wholesale electricity to electric utilities and power marketing companies.

The Public Utilities Commission of Nevada (PUCN) approved a $9.3 million rebate for Sierra Pacific Power Co.'s electric and gas customers that will become effective on their October bills. It is the third and final installment of a "shared savings agreement" which enables customers to benefit from the operating efficiencies achieved by the company in 1999. For the typical residential electric customer, the rebate amounts to $11.26. For the typical natural gas customer, the rebate is $3.72. Electric customers will also receive another 51 cents as part of a refund announced last month, bringing the total rebate for electric customers to $11.77. In addition, electric prices today in northern Nevada remain lower than they were in 1994. The rebates are part of an agreement first negotiated with the Bureau of Consumer Protection and the PUCN in 1997 that splits the proceeds from operating efficiencies achieved by the company during a three-year period. Under the agreement, any Sierra Pacific earnings for 1997, 1998 and 1999 that exceeded a certain plateau were divided 50/50 between the utility's customers and its shareholders. The company previously rebated customers close to $20 million in May and August 1999 for savings attained during 1997 and 1998.

The board of directors of the New York Mercantile Exchange has amended plans to move up the start-up time for natural gas futures trading because of the overlap with crude oil markets, which share an options ring with natural gas. Daily gas futures trading now will commence at 9:30 a.m. rather than 9:45, which was supposed to be the new opening time. Gas futures currently begin trading at 10 a.m. The board has scheduled expanded energy trading hours to begin with the Sept. 8 trading session. On July 13, the board voted to expand futures trading hours electronically for its light sweet crude oil, heating oil, gasoline, and natural gas futures and options markets. It also voted to have an earlier opening for the open outcry session for natural gas futures and options (see NGI, July 17). Beginning at 4 p.m. on Sept. 7 the Nymex Access electronic trading sessions for those commodities will be extended to run from 4 p.m., Mondays through Thursdays, to 9 a.m. the following day. On Sundays, the session will begin at 7 p.m. and will run until 9 a.m. on Monday. Currently, the sessions for light sweet crude oil, heating oil and gasoline begin at the same times but close at 8 a.m. Natural gas futures and options currently are traded from 4 p.m. to 7 p.m. Mondays through Thursdays with no Sunday night session.

Panda Energy International inked a firm electrical transmission agreement with Arizona Public Service to supply power from its proposed natural gas-fired 2,000 MW plant to be located in the town of Gila Bend. The proposed plant is before the Arizona Corporation Committee for review. Senior vice president of merchant plant development for Panda, Garry Hubbard, said that the firm contract is "a critical step forward for the plant." The new plant is on schedule to commence construction later this year, with start up 18 months later, he added. Powering the plant will be eight General Electric 7 FA natural gas turbines operating in combined cycle.

DukeSolutions has signed a $9.2 million energy cost reduction contract with the Army Corps of Engineers to install and fund energy-saving measures at the Charleston, SC, Air Force Base. The measures implemented by DukeSolutions will be paid for out of the base's expected energy cost savings of $840,000 a year. The contract will help the base comply with Executive Order 13123, which states that government agencies must cut energy use 30% by 2005, and 35% by 2010, based on 1985 emissions levels.

Southern Company Energy Marketing reported that its second quarter wholesale power sales declined slightly compared to last year but its wholesale natural gas sales increased. The company sold 46.7 million MWh of electricity during the second quarter, compared with 49.4 million MWh in 2Q99. And it sold 5.9 Bcf/d of natural gas, compared with 4.3 Bcf/d in 2Q99. Southern Company Energy Marketing is jointly owned by Southern Energy Inc. and Vastar Resources Inc.

KeySpan filed an application with the New York State Public Service Commission to expand the generating capacity of its Ravenswood power plant in Long Island City by 250 MW. When completed in 2003, the expanded power plant, which will be primarily fueled by natural gas, will be the cleanest and most efficient generating station in New York City. Today, Ravenswood is the city's largest power plant with a capacity of 2,168 MW, or 28% of the electric generation located in New York City. "New York City has a critical need for electric power," said Chairman Robert B. Catell. "An expanded Ravenswood power plant would help ensure that the city has adequate capacity to meet the ever-increasing demand for electricity." This year, New York City is 300 MW short of meeting its reliability requirement for in-city electric-generation capacity, and the city's demand for electricity continues to grow at the rate of 150 MW per year, the company said.

Mariner Energy entered into an agreement to buy Shell Exploration and Production's 50% stake in the "King Kong" Deepwater Gulf of Mexico development project. The project is located in 3,900 feet of water in Green Canyon Blocks 472, 473 and 517, which are about 150 miles southeast of New Orleans. Mariner purchased Shell's interest for an undisclosed amount of cash and overriding royalty interest in the field. Mariner will be named operator. Agip owns the remaining 50% interest. Mariner intends to develop gas reserves from two separate reservoirs discovered by three exploration wells that were previously drilled in the project. The initial development plan calls for completing a previously drilled well and drilling an additional development well, with both subsea wells tied back 16 miles to the Allegheny mini-TLP operated by Agip. Mariner also plans to drill its "Yosemite" exploration prospect located adjacent to King Kong in Green Canyon Block 516 before the end of the year. If successful, the company expects Yosemite to be jointly developed with King Kong. Mariner anticipates production from the project to commence by Dec. 31, 2001. Mariner is majority owned by an affiliate of Enron North America Corp., which along with a group of Mariner employees provided equity financing for a management-led buyout in 1996.

Atlanta Gas Light said it has recalculated the capacity charges that appear on the bills sent by marketers to the nearly 1.5 million natural gas customers in Georgia. The recalculation is based on the amount of capacity needed to support the gas delivery system and is based on the gas usage at each customer premise during the most recent year. Updated calculations go into effect Aug. 1. For most customers, this change is very small. "About half of the customers will see a slight increase, and about half will see a slight decrease," said Hank Linginfelter, vice president of rates for AGL.

Large one-time charges during the second quarter cut Southwestern Energy's earnings down considerably. A negative $109.3 million judgment in the Hales royalty lawsuit ($66.7 million after-tax) and an extraordinary loss on early retirement of debt more than offset a $3.2 million gain from the sale of the company's Missouri utility properties, which closed May 31, and improved results from exploration and production operations. Southwestern reported a net loss of $64.2 million, or $2.57 per share. Excluding the one-time charges, Southwestern net income would be $1.4 million, or $0.05 per share compared to last year's loss of $1.7 million, or $.07 per share. "Our results for the first half of 2000 reflect the growing momentum of our E&P business, even though these positive results are overshadowed by the financial impact of the Hales verdict," stated President Harold M. Korell. "Our production is up and our drilling results have been excellent for the first half of the year. As for the proposed sale of our utility business, we are moving forward in this process and are currently soliciting interested parties. Overall, we are very optimistic about the progress of our E&P strategy and are focused on creating value for our shareholders."

Honeywell Power Systems has been awarded $10 million from the Department of Energy for research and development of a large-scale advanced microturbine for on-site power generation. With the award, Honeywell will further develop its next generation Parallon power system, a larger more advanced version of the company's 75 KW Parallon 75 turbogenerator. The Parallon 75 is designed to convert natural gas or liquid fuels into electricity for on-site power generation. It is designed to help small-to mid-sized facilities reduce their energy bills, improve power quality, and minimize the risk of power outages. Work is expected to begin in October. Honeywell's next generation unit will generate 350 KW and will be designed to bring highly reliable, energy efficient, low-cost power to large-scale commercial and industrial customers.

DTE Energy Technologies signed a distribution agreement for standby electric generators with Kohler Co., a manufacturer of distributed power systems. DTE will market the prepackaged Kohler products on a non-exclusive basis in southeastern Michigan under the "energy now standby power" brand. The standby power units operate on natural gas or liquid propane, with rated power ranges of 7.5 KW to 2 MW. The units feature the Kohler line of electronic controls and transfer switches, which permit automatic startup when emergency power is needed.

UtiliCorp United announced that its $US189 million joint bid with United Energy for 45% of AlintaGas, a gas distribution utility in Western Australia, has been accepted by the state's government. The transaction is expected to close by the end of October. AlintaGas is based in Perth and serves 400,000 customers. It is Western Australia's principal gas distributor. The remaining 55% of the company will be offered to the public in Australia in a share float scheduled for September.

TXU announced record financial results for the second quarter. Earnings for the second quarter were $0.87/share on record revenues of $4.6 billion (a 23% increase) and record net income of $227 million. This compares to $0.35 per share for the second quarter of 1999. Excluding non-recurring items, operating earnings were $0.67/share compared to $0.52/share for the same period in 1999, a 29% increase. "All of our operations continue to perform well, and the outstanding results from our Australian operations provide yet another example of the benefits of successful implementation of our portfolio management business model," said Chairman Erle Nye.

Houston's EEX Corp. said its Llano No. 3 well, located on Garden Banks Block 386 in the deepwater Gulf of Mexico, has been drilled to its planned total depth of approximately 25,500 feet, encountering hydrocarbons in the Lower Pliocene- and Miocene-age sands. Based on a log analysis, the well encountered approximately 340 of net pay, which may indicate a "significant discovery," said Tom Hamilton, CEO. EEX is the operator of Llano with 30% working interest. ExxonMobil Corp. holds a 20% interest, PanCanadian Petroleum Ltd. holds a 20% interest and Enterprise Oil Plc has a 30% interest. EEX announced it has entered into an agreement with Murphy Oil Corp. to farm out its 40% working interest in the Mason Prospect in return for a carried 18% working interest in the initial exploration well on the prospect. The Mason Prospect on Garden Banks Block 562 is located about 10 miles south of the Llano area. The well will be operated by Murphy and targets potential hydrocarbon accumulations in both Lowe Pliocene- and Miocene-age sands. Drilling is expected to begin soon. Other partners in the project are PanCanadian and Enterprise. EEX reported a second-quarter net loss of $16 million or $.038 per share, compared to a net loss of $33 million or $.079 per share for second quarter 1999. Included in the results is a $12 million impairment for producing property resulting from an evaluation of an Indonesian field. Revenues were $62 million compared with $44 million last year in the second quarter, resulting from higher natural gas and crude oil prices, and higher natural gas sales volumes.

Washington Group International has been awarded a turnkey project valued at more than $200 million to expand Louisiana Land & Exploration's Lost Cabin Gas Plant facility in central Wyoming. The project will more than double the existing capacity of the plant. The new plant will be capable of processing 180 MMcf/d of gas, removing hydrogen sulfide, carbon dioxide, elemental sulfur, and other impurities. LL&E is a wholly owned subsidiary of Burlington Resources. "LL&E has had great success over the past several years with this plant and the associated well drilling program," said Washington Petroleum & Chemicals President Bob Wiesel. "The combination of growing demand, efficient operation, and reservoir volumes is creating the need for the plant to be expanded again. We designed and built the original Train 1 and the Train 2 expansion. We take it as a great sign of confidence that LL&E has chosen us again for the larger Train 3 expansion." The raw gas to be processed in the plant comes from wells in the deep Madison Formation in the Madden field in central Wyoming.

Southern Energy and Cleco Corp. agreed to jointly develop a 150 MW gas-fired power plant in Perryville, LA 12 miles north of Monroe. The peaking unit is expected to be available for operation by summer 2001. The project would be developed and owned on a 50-50 basis. In summer 2002, the subsidiaries plan to have an additional 550 MW combined-cycle unit, consisting of two natural gas-fueled turbines, at the site. Plans include the possibility of expanding the plant by converting the original peaking unit to a combined- cycle unit as early as 2004.

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