NGI The Weekly Gas Market Report
Dynegy Inc. announced yesterday definitive agreements to sellcertain east Texas natural gas gathering, treating and processingfacilities, owned and operated by its wholly owned subsidiary,Dynegy Midstream Services LP, to an independent midstreamprocessing company. The closing of the sale is expected to occurprior to year-end. Neither the identity of the buyer nor the saleprice was disclosed.
The assets being sold include four gas processing and treatingplants and 675 miles of related gas gathering with a currentthroughput of 100 MMcf/day. Proceeds from the sale, net of taxes,will be used to reduce debt.
“This sale accomplishes several of our strategic objectives,”Chuck Watson, CEO of Dynegy said. “This transaction is consistentwith our goal of reducing our capital investment in the natural gasliquids business in those areas outside of our core Permian and Ft.Worth Basins and Gulf Coast strategic areas.”
Watson added that the deal was made with Dynegy’s pending mergerwith Illinova in mind. “Sales of less strategic assets from acrossthe company, which are expected to exceed $600 million between nowand mid year 2000, will reduce the expected size of a new equityoffering from a range of $400 to $500 million, as originallycontemplated at the time the proposed merger between Dynegy andIllinova was announced, to about $250 million. By doing so, we willachieve our balance sheet objective and coverage ratios, therebypreserving and enhancing our credit ratings and avoidingunnecessary dilution of shareholders’ ownership interests.”
The merger between Houston-based Dynegy and Illinois-basedIllinova has already received FERC and shareholder approval fromboth companies. Dynegy needs to address their interest in twocogeneration facilities before the merger is complete, John Sousa,a Dynegy spokesman said. Both companies expect the transaction toclose during the first quarter of next year.
The $2 billion deal would create an energy giant with more than15,000 gross megawatts of domestic generating capacity representingthe nations most geographically diverse generating asset portfolio.Illinova’s gas and electric utility subsidiary serves 650,000customers, and Dynegy is one of the largest marketer of gas liquidsin the United States.
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