After testing the competitive waters, KeySpan Energy saidyesterday it signed a two-year asset and supply managementagreement with Coral Energy. Under the deal, Coral will assistKeySpan in managing all the upstream assets of KeySpan’s gasutilities as well as the fuel supply for KeySpan’s Long Islandgeneration plants. Financial terms of the deal were not disclosed.The contract was awarded following an 11-month review ofcompetitive bids from multiple marketing and trading companies.

“KeySpan is extremely well positioned in the Northeast, andcreating this relationship with Coral presents tremendousopportunities for both companies,” said Charlie Crisp, CEO of CoralEnergy. “The powerful collaboration of KeySpan’s supply assets andtheir knowledge of the Northeast markets and our marketing andtrading expertise will result in higher returns for both of us.”

Coral will work directly with KeySpan Energy Trading Services tomaximize the value and minimize the net cost of $1.6 billion inKeySpan purchases and upstream utility assets, which includenatural gas pipeline transportation and storage, fuel oilpurchasing and storage, and the sale of emissions credits.

The arrangement replaces and is much larger than the $500million contract KeySpan subsidiary Brooklyn Union signed withEnron in 1998, KeySpan spokesman Robert Mahony said. However,unlike the Enron deal, Coral will not be taking control of BrooklynUnion’s assets (capacity on six pipelines, 36 Bcf of workingstorage capacity and one LNG plant with 1.5 Bcf of storage) nor itssupply contracts, which cover about 200 Bcf/year (nearly 550MMcf/d) of gas with 50 suppliers. Instead, Coral will be assistingKeySpan in managing BU’s supply and upstream gas transportation.

Coral was quick to point out that this agreement is not anoutsourcing deal. “This is an alliance in which we will put Coralpeople in the energy management offices of KeySpan, to help themwith energy decisions,” said Jimmy Fox, a Coral spokesman.

KeySpan CEO Bob Catell said, “By leveraging KeySpan’s regionalassets with Coral’s national market network we can increase savingsfor our gas customers and, under our regulatory agreement approvedby the New York Public Service Commission, we can realize a portionof those savings for the benefit of KeySpan’s shareholders.”

Under Brooklyn Union’s prior agreement with Enron, the marketingcompany promised savings of $10 million/year. Expected savings fromthe deal with Coral were not disclosed.

©Copyright 2000 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.