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Industry Briefs

Industry Briefs

The Transco pipeline system's capacity has increased by 204,099 Dth/d with the start-up of the SouthCoast Expansion project, said parent company Williams. The $108 million expansion provides additional firm transportation capacity to gas markets in Alabama and Georgia. The expansion loops 44 miles of pipeline and adds 31,500 hp of compression at stations in Rockford, AL, and Newnan, GA. The facilities add capacity to Transco's mainline from Station 85 in Butler, AL, to delivery points within zone four. The expansion will serve Atlanta Gas Light, Georgia Power and a new power generation plant to be built by the South Carolina Public Service Authority. FERC approved the SouthCoast Expansion in May (see NGI, Sept. 4). Transco also has numerous other expansions on the drawing board. The 38-mile, 236,000 Dth/d Sundance project will loop the southern mainline in spring 2002. The 152 mile, 700,000 Dth/d MarketLink project will loop the Leidy line in Pennsylvania and New Jersey. And the 125,000 Dth/d Cross Bay project will increase deliveries into New York City. The company cited robust economic growth and the subsequent development of gas-fired power generation facilities as the main force driving these expansions.

Saying that the merger was in the best interest of the public, the Oregon Public Utility Commission last week approved Sierra Pacific Resources' application to acquire Portland General Electric (PGE). Sierra Pacific last year announced it would acquire PGE, a wholly owned subsidiary of Enron Corp. for $2.1 billion, excluding debt (see NGI, Nov. 15, 1999). Under the merger agreement, PGE's customers will benefit from a six year price freeze and a $95 million credit. The "acquisition credit will show up on customers' bills as soon as the deal closes, and will continue to be evident until Sept. 30, 2007. Under the settlement, PGE will still retain the right to adjust rates to pass on commodity fluctuations. The merger has already received approval from the U.S. Department of Justice and the Federal Trade Commission, but still awaits the go-ahead from the Federal Energy Regulatory Commission (FERC) and the Securities and Exchange Commission. In a July FERC meeting, the Commission found that Sierra and PGE had failed to provide an adequate analysis of the vertical and horizontal market power effects. Consequently, FERC set out specific procedures for obtaining additional information analysis and intervenor input (see NGI, July 31).

Avista Advantage, a subsidiary of Avista Corp., has completed an investment agreement for an undisclosed amount with Wayne, PA-based EnerTech Capital Partners to help refine, expand and market the Spokane, WA-based company's suite of facility cost management service offerings. The agreement completes Avista Advantage's first round of private equity financing. Gary G. Ely, Avista Corp.'s acting CEO, said the agreement "will focus new attention on this important market segment, and create new value growth opportunities for both companies." EnerTech, one of the Safeguard Scientifics funds, is based in Wayne, PA. It specializes in companies poised for growth through deregulation, targeting the convergence of the energy, utility and telecommunications industries.

Cleco Energy LLC has purchased 160 miles of pipeline from Texas Southeastern Gas Co. and acquired 33 miles of Southland Energy Co. pipeline from International Paper for $3.2 million. Cleco Energy is a unit of Cleco Midstream Resources Inc., a subsidiary of Cleco Corp., based in Pineville, LA. The Texas Southeastern pipelines serve six municipalities, two local distribution companies, 11 industrial customers and three public authorities in southeast Texas. The Southland Energy pipeline runs from the Seven Oaks Field in Polk County, TX to an interconnect with existing Cleco pipelines in Lufkin, TX.

Danbury, CT-based FuelCell Energy Inc. has awarded contracts for two power plants using the company's Direct FuelCells for coal mine and remote location applications. The U.S. Department of energy National Energy Technology Laboratory received the first contract for $5.4 million to design, construct and operate a 250 kW DFC, using coal methane gas at the Harrison Mining Corp. mine in Cadiz, OH. The second contract for $100,000 went to the U.S. Coast Guard Research and Development Center in Groton, CT for a remote location, 3 kW fuel cell power system using methanol for fuel. It will be installed by the second quarter of 2001 at the Cape Henry Lighthouse at Fort Story in Virginia.

WGL Holdings is the new parent company of Washington Gas Light Co., a regulated natural gas utility that serves over 875,000 customers in Washington D.C., and other subsidiaries formerly under Washington Gas before this restructuring. "The creation of this new structure strengthens our competitive position in the new energy era," said James H. DeGraffenreidt, Jr., CEO of WGL Holdings. "It provides greater financial and regulatory flexibility and enhances our ability to continue improving our utility operations and growing profitable energy-related retail businesses."

CP&L Energy took the first step towards the construction of a 525 MW natural gas-fired power plant by taking the option to purchase a site in Effingham County, GA, just northwest of Savannah. Pending the receipt of certain permits and necessary infrastructure approvals, construction would begin during the summer of 2001 with a tentative in-service date of June 2002. The $200 million-plus project would be owned and operated by CP&L's Monroe Power subsidiary. The site was chosen because it lies near an El Paso natural gas pipeline and has Southern Company's electric transmission lines crossing the property

Green Mountain Energy, AES NewEnergy, Enron Energy Services, Exelon Energy and the New Power Company have formed the Alliance for Retail Markets (ARM) to collectively participate in the Public Utility Commission of Texas' electric restructuring proceedings and related activities before the Texas State Legislative Oversight Committee on Electric Restructuring. ARM intends to work with the state to ensure the rules for restructuring the Texas electricity market will establish fair and open retail competition while fostering the broadest choice for energy consumers. "Texas has the potential to be the best market for retail competition in the country by creating a healthy, competitive environment that maximizes consumer choice," said Gillan Taddune, Texas regional manager for Green Mountain. ARM's members said they welcome other retail electricity providers that are interested in entering the Texas market.

Canada's National Energy Board released the latest in a series of Energy Market Assessment (EMA) reports entitled Canadian Natural Gas Market Dynamics and Pricing. The report identifies factors that affect natural gas prices and describes the current functioning of the regional gas markets in Canada. It concludes that Canada has become part of an integrated North American gas market. With the increased integration of the markets, regional supply and demand forces are felt throughout the marketplace. It also noted a combination of strong economic growth, a preference for gas-fired electricity generation, and low gas prices led to sustained growth in gas demand throughout the 1990s. However, the growth in supply lagged during the last few years because of the low oil price environment of 1997/1998. A review of the annual weighted average border price paid for Alberta gas indicates that domestic gas users paid less than export customers until 1998 at which point the two prices have converged. This indicates that Canadians have had access to natural gas on terms and conditions, including price, no less favorable than export customers. The report concludes the natural gas market has been functioning so that Canadian requirements for natural gas have been satisfied at fair market prices. Copies of the EMA report available on request from:

After being on the divestiture road for almost a year and shedding $3 billion worth of non-core assets, TransCanada PipeLines Ltd., reported that its first nine months of 2000 and third quarter showed progress over the equivalent time periods of 1999. Net earnings before asset sales and long-term natural gas contract losses were $433 million ($0.91 per share) for the first nine months of 2000, compared to $402 million ($0.86 per share) during the same period last year. The company attributed the 8% increase to higher income from the power and gas marketing businesses as well as reduced financial and preferred equity charges. Before adding special items, the company posted third quarter net earnings of $151 million ($0.32 per share), compared to $141 million ($0.30 per share) for the third quarter of 1999.Deliveries of natural gas on the Canadian Mainline and the BC system were approximately the same for the first nine months of 2000 and 1999. The Canadian Mainline delivered about 7.3 Bcf/d for both periods, while the BC system delivered approximately 1.1 Bcf/d. The Alberta system did experience a decline. For the first nine months of 2000 it delivered an average of 12.2 Bcf/d, compared with the same period during 1999 when it delivered 12.4 Bcf/d. Marketing also stumbled a bit, as the company marketed about 6.1 Bcf/d for the first nine months of 2000, compared to 6.6 Bcf/d for the first nine months of 1999. TransCanada took a beating on some long-term natural gas contracts it had entered into to support various pipeline investments and other business initiatives. Due to growing natural gas demand in Alberta, and excess pipeline capacity leaving the province, the price differential between the Western Canada Sedimentary Basin and eastern market areas continued to shrink. TransCanada was forced to enter into third party arrangements to crystallize the negative value of its long term natural gas contracts and the company reported taking a $124 million after-tax charge associated with the losses.

DPL Inc. announced the closing of the sale of its retail natural gas business unit to Vectren Corp. for $425 million in cash. "The completion of the sale of the gas business unit supports the expansion of our merchant generation business," said DPL CEO Allen Hill. To date DPL has completed or announced the addition of 800 MW of peaking capacity, representing an investment of $270 million. "Our generation expansion plans are on track, and we expect to have 5,000 MW of capacity in operation by the summer of 2003," Hill added. DPL's principal subsidiaries include DPL Energy and The Dayton Power & Light Company (DP&L). DPL Energy operates 3,500 MW of generation. DP&L provides electric service to 500,000 retail customers in western Ohio.

The New Power Co., based in Greenwich, CT, has filed an application with the Texas Public Utility Commission to provide electricity in the soon-to-be-deregulated marketplace of Texas. Texas begins a pilot deregulation program in 2001, and will be completely deregulated in 2002. The company, formed in May 2000 to provide electricity and natural gas directly to households and small businesses, wants to offer energy at competitive prices, flexible payment and pricing choices, along with products and services, such as frequent flyer miles. Formed by Enron, The New Power Co. began acquiring customers in select utility markets in Pennsylvania and New Jersey in October. It has acquired 285,000 natural gas and 20,000 electricity customers from the subsidiaries of Columbia Energy Group covering eight states. It also has reached an agreement with PECO Energy Co. to supply competitive default service for up to 299,999 of its electricity customers.

In the fourth deal of its kind this year, Constellation Energy Source reported that it has signed a three-year energy management agreement with McCormick & Co., an international producer of spices and specialty foods, for an undisclosed sum. The companies will develop a program which will provide McCormick and its 20 properties with an on-going evaluation of energy consumption as well as a process to optimize energy use and minimize energy costs. "[Constellation] will assist McCormick in the management of their energy portfolio," said Greg Jarosinski, president of Constellation Energy Source. Constellation spokesman Paul Sleeper said, "It's a full services contract, we will work with them on any energy related matters that they might have. It could range from keeping them advised on what's going on with regards to deregulation just as a consulting type of a service, to actually gathering the history of their utility bills and going out and soliciting and evaluating offers from third party marketers as deregulation evolves in the different states they have their properties in." Earlier this year, Constellation Energy Source signed similar energy management agreements with The Rouse Co., The Mills Corp. and Corporate Office Properties Trust.

NiSource Inc., the gas and electric power distributor headquartered in Merrillville, IN, reported that its earnings were up 25% for the third quarter, with a per common share of $1.27 compared with $1.02 in the third quarter of 1999. The results were "favorably impacted" by the sale of Market Hub Partners, which resulted in a $23.8 million after-tax gain, or approximately 19 cents per common share. NiSource said that continued customer growth from the company's natural gas, electric and water distribution businesses contributed to improved earnings, offset by decreased electricity sales in the cool summer, increased interest charges of $28.4 million related to the Bay State Gas and EnergyUSA-TPC acquisitions, and expenditures of $5 million related to the NiSource Columbia Energy Group merger (see NGI, June 5). Net income was $1.55 million, an increase of $27.6 million from the third quarter of 1999. Gas operations EBIT increased $83 million to $144.7 million from last year, mostly because of its Market Hub Partners sale. Electric operation earnings EBIT increased $8.9 million to $292 million because of decreased operating expenses, which were partially offset by decreased sales to residential customers during the cooler summer compared to the same period in 1999. NiSource said its cooling degree days were down 23% from a year ago, which also decreased bulk power sales to other utilities. As part of its merger with Columbia Energy Group, which closed Nov. 1, NiSource completed exchanging Columbia common shares for those electing to receive stock under an exchange ratio of 3.04414. Under the merger terms, the exchange ratio was determined by dividing $74 by the average closing price of NiSource common stock beginning Sept. 18 and ending Oct. 27. The average for the period was $24.3090. Columbia shareholders who wanted to receive NiSource stock in the merger were supposed to submit their completed election forms and stock certificates by 5 p.m. Monday (Oct. 30). Contact ChaseMellon Shareholder Services at (800) 685-4258 for information.

Williams reported that its wholly-owned partnership Williams Energy Partners L.P., has filed with the Securities and Exchange Commission (SEC) to launch an initial public offering (IPO) of common units. The subsidiary was formed to acquire, own and operate a diversified portfolio of energy assets including four marine petroleum product terminal facilities, 24 inland terminals that act as a distribution network for gasoline and other refined petroleum products, and an ammonia pipeline and terminal system that travels from Texas to Oklahoma to Minnesota. Under the symbol "WEG," Williams hopes to offer 3,750,000 units (32% of the partnership) beginning in January 2001. Williams will retain the remaining 68% interest in the partnership.

DTE Energy and MCN Energy said they are making progress with the Federal Trade Commission (FTC) on their proposed merger, but now expect the regulatory hold-up to delay completion of the merger past the end of the year. "While we are aggressively working to close this deal in 2000, despite our efforts, as each day passes it appears less likely that this transaction will close by year-end," said DTE CEO Anthony F. Earley. The FTC raised concerns about cogeneration load and other gas/electric displacement technologies in the companies' coincident retail distribution areas, but the companies have taken action to address the issue by agreeing to sell a portion of MCN's gas distribution capacity to a unit of Exelon (previously Unicom). "The proposed capacity sale to a unit of Exelon created a framework for productive discussions with the FTC," said Earley. "It is our view that we have narrowed those discussions to a few issues related to the Exelon agreement and I am hopeful these can be resolved soon." The capacity sale agreement is subject to Michigan Public Service Commission (MPSC) review. "We expect to work the regulatory reviews simultaneously and will seek approval from the MPSC as progress is made with the FTC," Earley said. In the meantime, the two companies continue to refine their integration plans to allow for a rapid integration of overlap functions. They expect to save $1 billion in corporate synergies following completion of the $4.6 billion merger (including debt assumption). DTE's principal operating subsidiary is Detroit Edison, an electric utility serving 2.1 million customers in Southeastern Michigan. MCN's largest subsidiary is Michigan Consolidated Gas, a gas utility serving 1.2 million customers throughout Michigan.

Alliant Energy announced its subsidiary Alliant Energy Resources (AER) has formed a strategic partnership with Internet-based service provider SmartEnergy in an effort to begin developing strategic partnerships with "e-focused businesses with significant competitive advantages within their respective markets." As part of the agreement, AER will make a financial investment in SmartEnergy and add Frank Greb, its director of mass-market development to SmartEnergy's board of directors. AER plans to support the Internet-based company's web-enabling technologies as it implements them in other regions in the energy industry. Currently, SmartEnergy provides electricity and natural gas service to the five boroughs of New York City, and Westchester County, NY. The company hopes to expand into as many as five states by the year's end.

TECO Energy's power services subsidiary announced its intention to buy GenPower's interests in two independent natural gas-fired power projects with a combined total of 1,200 MW under development in Arkansas and Mississippi. TECO Power Services (TPS) expects to invest approximately $330 million. The company said the projects known as McAdams and Dell will be interconnected with the Entergy transmission system to market electricity to wholesale customers in Arkansas, Louisiana, Mississippi, Alabama, Georgia, Tennessee and Kentucky. They are expected to be in operation during the second half of 2002. TPS has ownership interests in almost 3,200 MW of operating and under construction power worldwide. TECO Energy also announced that former Chase Manhattan Executive William D. Rockford has been named to its board of directors. Rockford specialized in global project finance and the power industry for 28 years.

Cinergy Corp. announced that it is setting a target for average annual earnings growth of 7-8% over the next three years. "As our industry is evolving more clearly toward regulated markets and new markets, we are focusing on strategies that will be successful in the marketplace of the future," said CEO James Rogers.

Houston Energy Association's (HEA) members have approved a merger plan with the National Energy Services Association (NESA) in a vote taken at the group's annual meeting. The approval will allow for the merger to be complete and operational as one company on Jan. 1, 2001. The combined company will be Houston-based and comprised of people in energy related professions such as natural gas transportation and trading, electricity generation, transmission and trading and related financial services. NESA/HEA primary task is to maintain a forum for professional educational programs and networking among members.

Reliant Energy entered into a 32-year naming rights agreement for Houston's new state-of-the-art football stadium and the sports, entertainment and convention complex currently known as the Astrodomain Complex. The deal covers five buildings in all. Within Reliant Park there will be Reliant Stadium, Reliant Astrodome, Reliant Arena, Reliant Hall and Reliant Center. The park will be home to the Houston Livestock Show and Rodeo as well as the NFL's Houston Texans. The Texans will host their first preseason game in August of 2002. Although the company refused to comment on the cost of the naming deal, an article in the Houston Chronicle put the price at $300 million. That exceeds the previous high for a naming deal of $205 million over 27 years. FedEx paid that to name the Washington Redskins' stadium Field.

Colorado Interstate Gas Co. has begun transporting an additional 33 Mdth/d of natural gas from the Raton Basin to delivery points on its system following completion of its Picketwire Lateral Loop in southern Colorado. The Coastal Corp.'s Rocky Mountain pipeline subsidiary placed the line in service Oct. 24. The 20-inch, 12.5-mile pipeline is expected to meet producer demands for additional capacity out of the basin, now one of the most prolific coal bed methane production areas in the country. Total coal bed methane resources in the basin are estimated to be more than 18 Tcf, according to a U.S. Geological Survey report. Capacity on the loop has been committed to existing CIG shippers, including Evergreen Resources Inc., Barrett Resources Corp., El Paso Production Co. and Shenandoah Energy Inc. Since 1994, CIG has invested nearly $45 million in facilities directly tied to Raton Basin production with the 115-mile Campo Lateral, the Cucharras Lateral and several smaller laterals for individual customers.

Reliant Services LLC plans to purchase Miller Pipeline Corp., a natural gas distribution contractor, from NiSource Inc. for $68.3 million under an agreement announced last week. Reliant is jointly and equally owned by subsidiaries of Vectren Corp. and Cinergy Corp., and the acquisition will expand its utility services business, adding underground pipeline construction, replacement and repair services. Reliant Services already offers underground facility locating, contract meter reading and installation of telecommunications and electric facilities. "This is a logical step in our strategy for growth," said Vectren CEO Niel C. Ellerbrook. "It both complements our core business and strengthens our ability to manage costs." Ellerbrook said Miller's "strong management team" has grown revenues on average of 14% in the last three years to nearly $73 million in 1999. He also said the acquisition would be "slightly" accretive to earnings for Vectren in the first year of operations. Cinergy CEO James E. Rogers said that he expected Miller's growth to come from the general demand for new infrastructure with suburban growth and the "increasing demand of utilities for contractors with a large regional presence." NiSource said it would sell Miller as part of its merger with Columbia Energy Group, which closed last week. The acquisition still requires review by the U.S. Department of Justice under the Hart Scott Rodino Act, and should be completed before the end of the year.

DukeSolutions is hauling in eight independent power facilities for $81 million from Houston-based Waste Management Inc., and has plans to invest another $20 million into the cogeneration and renewable energy facilities in California, Pennsylvania, Maine and Florida. Together, the facilities generate 244 MW and revenues over the next 15 years could exceed $1 billion. The facilities provide steam and chilled water under long-term contracts with industrial and institutional customers and long-term electricity under contracts with Southern California Edison, Pacific Gas and Electric, Maine Public Service, Florida Power Corp. and Pennsylvania Power and Light. DukeSolutions will own and operate the facilities, and its parent, Duke Energy, and subsidiaries will add complementary services, including commodity supply and hedging. "This acquisition will expand our 'inside the fence' presence in the industrial and institutional markets and will help balance the corporate portfolio with regard to the merchant positions of Duke Energy North America and Duke Energy International," said DukeSolutions COO Keith G. Butler.

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