NGI The Weekly Gas Market Report
DPL Inc. of Dayton, OH, agreed to sell its retail gasdistribution business to Indiana Energy Inc. of Indianapolis, ID,for $425 million in an all-cash sale to be accounted for as apurchase.
The deal will add about 305,000 residential, commercial,industrial, and government customers to Indiana Energy’s nearly508,000 central Indiana customers and 5,000 miles to IndianaEnergy’s 11,000 miles of pipeline. The service area of DPL’s gasbusiness is contiguous to Indiana Energy’s distribution system inEast Central Indiana and includes 16 counties in West Central Ohio.Revenues for DPL’s gas distribution business for the 12 monthsended Sept. 30 were $215 million.
On June 14, Indiana Energy and Sigcorp Inc.-the holding companyof Southern Indiana Gas and Electric (Sigeco), which provides gasand electricity to 150,000 customers in southwest Indiana-announcedplans to merge in a $1.9 billion deal. The companies would form theholding company Vectren Corp. Niel C. Ellerbrook, CEO of IndianaEnergy, would become Vectren CEO. The deal is expected to close inthe first quarter, before the acquisition of DPL’s gas business.Once acquired, DPL’s gas business will operate under the Vectrenbrand and will remain in Dayton.
“The acquisition of DPL’s natural gas distribution business,together with our pending merger with Sigcorp, will enable Vectrento provide energy-related products and services to nearly onemillion customers in the Midwest,” Ellerbrook said. “With ourneighboring service territories, DPL’s natural gas distributionbusiness is a logical extension of Indiana Energy’s distributionoperations.”
DPL was required to separate its electric business units withthe July passage of Ohio electric restructuring legislation. “Inseparating and evaluating all of our business segments, weannounced that we would explore the sale of our natural gas retaildistribution business unit,” said Peter H. Forster, DPL chairman.”This sale will allow DPL to focus on growing the electricbusiness. We will invest the after-tax proceeds from this sale tocontinue expansion of our electric combustion turbine business, tofinance in part other business unit capital needs, to continue ourstock buyback program and to reduce any then outstanding short-termdebt.”
DPL is expanding its gas-fired generation, adding 795 MW in fourphases. Details will be forthcoming, the company said. Expansionsare in Ohio and Indiana and are planned to be in service startingthis summer.
DPL will continue to provide meter-reading and billing todistribution system customers and will continue to market gasthrough DPL Energy. Regulatory approval is required from the PublicUtilities Commission of Ohio, the Securities and ExchangeCommission and under the Hart Scott Rodino Act. Shareholderapproval is not required.
The deal is expected to be slightly accretive to Indiana Energyearnings in the first full year after closing, excluding one-timecharges related to the transaction. Initially financing is to comefrom a bank credit facility, to be replaced over time withpermanent financing. Indiana Energy hopes to complete thetransaction by the end of the second quarter.
DPL supplies energy services to customers in the Midwest throughsubsidiaries The Dayton Power and Light Co. and DPL Energy. DPLcontinues to buyback its shares and has bought more than $60million worth this year. Indiana Energy is the holding company ofIndiana Gas Co. Inc., IEI Services LLC and IEI Investments Inc.Distributor Indiana Gas serves nearly 508,000 customers in centralIndiana.
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