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Avista Picks Up Vitol; Joins Top 10 Power Marketers
Avista Energy, a Washington Water Power (WWP) affiliate,continued its expansion onslaught Thursday by announcing that itacquired Vitol Gas and Electric LLC, a full service energy marketerserving the eastern U.S. Terms of the agreement were not madepublic. The deal is expected to close in early 1999.
This marks the second gas marketing acquisition the WWP affiliatehas announced in the past two days, and the third expansion in thepast week. Yesterday, Avista Energy’s Canadian arm, Avista EnergyCanada, bought Coast Pacific Management, a gas marketer and managerfor industrials in British Columbia (See Daily GPI, Dec. 17). Last week, thenonregulated marketing company agreed to supply gas to an electricgeneration plant being built in Idaho by a partnership between AvistaPower and Cogentrix Energy Inc.(See DailyGPI, Dec. 14).
The Vitol acquisition, however, is Avista’s largest move thisyear, a company spokesman said. In NGI’s Power Marketer Rankingsfor 1998’s third quarter, Vitol ranked 16th and Avista Energyranked 18th in volume production. For that quarter, the twocompanies’ combined output equaled 30.7 MWh, which would haveplaced this alliance in the top ten. The spokesman added that thecombined gas volumes sold would amount to 2.8 Bcf/d after the dealis finished.
The acquisition made sense, said Tom Matthews, WWP’s CEO,because Avista’s marketing operations are focused on the west andVitol’s business takes place east of the Rocky Mountains. “The factthat there was minimal overlap in the markets our two companiesserve was critically important and made the deal a perfect fit,”Matthews said. “By combining the resources of Avista Energy andVitol Gas & Electric, we have placed ourselves squarely amongthe top ten energy marketing and trading companies in the nation.”
Pat Lynch, a WWP spokesman said, “Avista Energy has become aknown player on a national level, which was the idea all along.Overall, from an earnings standpoint, Mr. Matthews has made it veryclear that he wants all of WWP’s branches to increase theirearnings by 8 to 10% annually. This acquisition will help Avistaattain that goal.” Lynch added that in 1999, WWP will invest $130to $150 million in Avista Energy. The utility expects a 15% returnfrom that investment.
Neil Kelly, board chairman for the Boston-based Vitol, citedAvista’s experience with gas and electric infrastructures and itsability to control physical assets as reasons for the deal. “Werecognized that success in the long term would require partneringwith a larger, customer-focused company.We found the right partnerin Avista Energy,” he said.
Kelly will become chairman of Avista Energy once the deal isfinished. Michael Kutsch, currently president of Vitol, will becomeAvista Energy’s president. The current president of Avista, LloydMyers, will become Avista Power’s president.
Jim Bellessa, an analyst with D.A. Davidson & Co., thinksthat this is just the beginning for the WWP affiliate. “They’re(Avista Energy) eating instead of being eaten. Starting lastAugust, they cut their dividends and said that they wanted toquadruple their size. This is a move in that direction, but theyhave a long way to go.” Bellessa added that Matthews was hired withthe expansion strategy in mind, and “If he doesn’t grow the companyfast enough, somebody else will.” Matthews was hired over thesummer after being President of NGC Corp. for less than two years.”He is the expansion strategy.” Bellessa said.
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