Brussels-based Fortis said it completed its $410 million acquisition of Charlotte, NC-based Duke Energy’s commercial marketing and trading business, and expects to be operating on the “second tier” of energy trading companies.
The business is composed of Cinergy Marketing & Trading LP, a Delaware limited partnership, and Cinergy Canada Inc., an Alberta corporation, both fully owned subsidiaries of Duke, together referred to as CMT. CMT is a Houston-based marketing and trading platform operating in all key North American markets. The new trading entities will be known as Fortis Energy Marketing & Trading, GP in the United States and FB Energy Canada Corp. in Canada. The purchase price accounts for working capital and includes the base purchase price and the value of the current trading portfolio.
“We believe that Fortis Energy Marketing & Trading is now unique in its ability to provide a full service marketing and trading offering across North America and a full-range of banking solutions, all backed by Fortis’ strong AA- credit rating” said Fortis Merchant Banking CEO Filip Dierckx.
“Today’s acquisition of CMT underscores Fortis’ commitment to developing our North American presence and demonstrates our dedication to our customers,” said Fortis Americas CEO Waldo Abbot.
Fortis is among the 20 largest European financial institutions. The CMT acquisition will move Fortis into the “second tier” of energy merchant companies in North America, Dierckx said when the deal was announced (see NGI, July 3). “We can say and we can debate a long time about who is where. But in the first tier, there is Goldman Sachs, Merrill Lynch…they are in a range of grossing over $500 million. In the second layer, you have players like Barclays, Deutsche, UBS, even Citigroup, where you are between $200 million and $500 million in sales. With this acquisition, what we have and what CMT has, we are in the second tier group, which has the full capabilities and is only somewhat behind the biggest investment banks.”
The North American energy marketing and trading businesses will be co-headed by Jim Fallon and David Jones. Fallon was previously president of CMT and Jones was U.S. head of energy trading at Fortis.
On an after-tax basis, Duke anticipates total cash proceeds of approximately $475 million and does not expect to record a material gain on the sale. Fortis paid about $210 million for Cinergy and about $200 million for the associated portfolio of contracts, plus an amount equal to working capital.
“This exit from the commercial marketing and trading business is aligned with our company’s sharpened focus on growing core businesses that can be expected to contribute steady, stable earnings and dividend growth,” said Duke CEO James E. Rogers.
In addition to the sale of its gas and power marketing unit, Duke also has spun off its natural gas business, a marked departure from the gas-power convergence strategy espoused by Duke and others during the late 1990s (see NGI, July 3).
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