The second time proved a charm for Bear Stearns Cos. Inc., which Friday closed a deal to purchase substantially all of the power assets and the trading book of Williams.
The deal between subsidiaries Bear Energy LP and Williams Power Co. Inc. gives Bear Energy about 7,500 MW of gas-fired tolling capacity, 1,800 MW of full requirements power supply contracts with cooperatives in Georgia and Pennsylvania and an associated trading book. Bear Energy also will hire more than 30 Williams Power employees.
The transaction was originally announced in May (see NGI, May 28), and the adjusted sales price was $496 million, down from the originally announced $512 million.
“The energy business represents an important strategic opportunity for our firm,” said Bear Stearns CEO James E. Cayne. “As we have steadily built our energy business over the last two years we have sought to broaden our footprint and diversify our revenue streams in this area. This transaction provides us with a significant step forward in achieving these objectives.”
Paul Posoli, president of Bear Energy, said his unit “now has one of the largest natural gas power generation portfolios in the United States, which enables us to provide unique solutions to our energy clients. We are capitalizing on our expertise in the physical power and gas markets, building a geographically diverse platform and broadening our relationships with existing and new customers with this transaction.”
Williams CEO Steve Malcolm said the sale would give his company a more favorable cost of capital for both debt and equity. “Improving our access to capital is an important driver in our ability to continue pursuing value-creating opportunities in our natural gas businesses.”
The assets sold in this transaction represent most of the value and risk associated with Williams’ former power business. The company expects to divest some remaining power and natural gas marketing assets and liabilities as part of its exit from the power business and associated streamlining of its ongoing gas marketing business.
Bear Stearns entered the domestic natural gas and power markets in 2005 in a venture with Calpine Corp. (see NGI, Sept. 12, 2005). That deal fell apart as Calpine edged into bankruptcy, but Bear Stearns stuck with its plan and went on to found Bear Energy in 2006, which is headquartered in Houston (see NGI, April 10, 2006). Bear Energy trades natural gas, electricity, coal, emissions, renewable energy, weather and crude oil.
Bear Stearns owns, controls or provides services to about 9,000 MW of power in parts of the Northeast, Midwest, the South and West Coast. The transaction is expected to be accretive to earnings and earnings per share in fiscal 2008.
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