The National Energy Board (NEB) will hold a public hearing on an application from TransCanada PipeLines Limited concerning 2001/2002 tolls and tariff issues. The NEB said the public hearing will commence on Aug. 20. Written interventions must be filed with the board by July 10. The need for a hearing began in April of this year when TransCanada and certain stakeholders reached an agreement on the terms of a settlement. The proposed settlement related to all tolls and tariff matters for the years 2001 and 2002, excluding cost of capital issues. The NEB said the settlement became effective on the first of January and established a toll methodology to be utilized for both 2001 and 2002, tariff provisions to be applicable in that time period, and the components of the revenue requirement (other than cost of capital) to be used in the calculation for final tolls for 2001. On June 6, TransCanada filed an application for the approval of the cost of capital to be included in the calculation of its mainline tolls for the years 2001 and 2002. The board said it will announce at a later date the process for dealing with that application. In May, the board had requested comments from interested parties on the substance of the tolls application as well as the need for and nature of a further process. The board decided that TransCanada’s settlement was not in accordance with the board’s guidelines for negotiated settlements of traffic, tolls and tariffs. The board directed TransCanada to advise whether it wished to file an amended application or have the board treat the application as a common position of parties. TransCanada advised the board that, after communicating with all of the signatories to the proposed settlement, it had decided not to file an amended application and requested that the board establish a process to consider the application as filed. For further information on the Aug. 20 hearing visit the NEB’s web site at www.neb-one.gc.ca.
Only two weeks after it had launched its friendly takeover bid of Gulf Canada Resources Ltd., Conoco Inc. reported last week that the Canadian Commissioner of Competition issued an advanced ruling certificate to the company, allowing the acquisition to go forward without the requirement of any further approvals under the Canadian Competition Act. In the merger transaction announced in early June, Conoco tendered a cash offer that would pay the Calgary-based company C$12.40 per share in a deal worth C$6.7 billion (US$4.3 billion). The deal is still subject to other regulatory hurdles, as well as Conoco’s conditions that were previously released. The acquisition is expected to be immediately accretive to Conoco’s earnings and cash flow per share. Conoco said it expects the merger to close in the third quarter. With this transaction, Conoco’s North American natural gas production and proved reserves will increase by 50% to 1.4 Bcf/d, and 4.1 Tcf net, respectively. Conoco added that its North American liquids production (crude oil, syncrude and NGLs) will more than double, and proved North American liquids reserves will more than triple. Conoco’s total worldwide reserves (including syncrude) is expected to increase almost 40% to 3.7 billion boe. Total worldwide production will increase 32% to 335 million boe in 2001. In addition, acquired properties offer the potential to add 1.2 billion boe from probable reserves already identified, the company said. Conoco added that Southeast Asia will become its fourth core area through Gulf Canada’s 72% interest in Gulf Indonesia Resources Ltd.. The company said it will more than double its proved reserves in Southeast Asia and more than triple 2000’s total net production from the region.
El Paso Corp. has officially launched its friendly C$347 million ($228 million) bid for Calgary’s Velvet Exploration Ltd., which, when completed, would give the Houston-based producer about 172 Bcfe more in net reserves, 59% natural gas, in the highly sought after Western Canadian Sedimentary Basin. The acquisition was announced in June (see NGI, June 18). Under terms of the offer, Velvet shareholders tendering their shares would receive C$8.15 in cash for each common share, with the offer open until July 31. The offer is an 11% premium over Velvet’s closing price in Toronto before trading was halted on Thursday. El Paso also will assume C$79 million in Velvet’s debt, making the deal worth about C$426 million total. In the first quarter of 2001, Velvet produced nearly 31 MMcf/d and 4,053 bbl/d. It is known for making exploration and production deals with native aboriginal groups in central and southern Alberta.
Following weeks of nasty accusations by both sides in a high profile hostile takeover attempt, Canadian Superior Energy Inc. has quietly withdrawn its bid for Calgary crosstown rival Canadian 88 Energy Corp., citing Canadian 88’s “erosion” of shareholder value relative to its own. Canadian Superior also cited Canadian 88’s refusal to provide requested information in its takeover attempt. The announcement closes out a two-month-long battle that began in April, when Canadian Superior offered 2.75 of its shares for every Canadian 88 share in a deal said to be worth about C$700 million (US$461 million), a deal that was quickly rejected (see NGI, May 14). The stock swap deal would have put Canadian 88 founder and former CEO Greg Noval, who is now Canadian Superior’s CEO, back in charge. Noval left Canadian 88 in 2000, but he remains on its board of directors. Canadian 88 has indicated it may attempt to remove Noval from its board in a board meeting scheduled in July. Downplaying the acrimonious dealings of the past two months, Richard Watkins, Superior’s vice president of corporate development, said, “The Canadian Superior proposal represents a premium offer to Canadian 88 shareholders, but we are not prepared to proceed forward at this time if Canadian 88 is not prepared to provide us with the same kind of critical information they have required from us.” Watkins said Canadian Superior would instead focus on its current assets. “Canadian Superior is in the process of working toward completing a transaction regarding the company’s East Coast holdings offshore Nova Scotia,” Watkins said. “Accordingly, given the continued delays and uncertainty regarding Canadian 88, we are withdrawing our merger proposal. Considering all the circumstances and the tremendous upside our East Coast holdings offer our current shareholders, the board cannot justify proceeding any further with the Canadian 88 merger proposal.”
After two closing dates failed to materialize early last week, Edison International, parent to financially ailing Southern California Edison Co., announced on Thursday its newly created nonutility financing arm completed a $1.2 billion debt restructuring that will close today. Through a complicated set of transactions within the Edison family of companies, the net proceeds ultimately will be used by Edison International to pay off loans due this year. Edison Mission Energy, the parent company’s nonutility power plant developer, through its subsidiary, Mission Energy Holding Co., has priced the issuance of $800 million of its 13.50% Senior Secured Notes due in 2008 and has received a commitment for a $385 million senior secured term loan. Both will close today (July 2). The Rosemead, CA-based parent company said the notes will mature on July 15, 2008; and be secured by the common stock of Edison Mission Energy on a pro rata basis with the term loan. The term loan will mature on July 2, 2006; and be secured by the common stock of Edison Mission Energy on a pro rata basis with the 13.50% Senior Secured Notes due 2008. In addition, the lenders may require Mission Energy Holding to repay $100 million of the term loan on July 2, 2004.
Duke Energy has entered into an agreement to acquire a 400 MW merchant generation facility from Enron North America. Acquisition of the Union County, MS, gas-fired facility expands Duke Energy’s Southeast generation portfolio. It also provides additional trading and structured origination opportunities throughout the eastern interconnect. Terms of the transaction were not disclosed. Closing is anticipated to take place in early October. The North American Electric Reliability Council estimates the Southeastern Electric Reliability Council needs an additional 40,000 MW of generation capacity over the next decade to meet peaking demand. Given access to major transmission lines, the Duke Energy facility will be able to serve demand throughout the southeastern and midwestern United States.
Calpine Corp. announced that Florida’s Power Plant Siting Board granted final state regulatory approval for its proposed 529 MW Osprey Energy Center, to be located in Auburndale, FL. Calpine is the first independent power producer to receive approval of a site certification application for a large-scale combined-cycle generating facility under Florida’s complex Power Plant Siting Act. Full-scale construction will begin later this year. The $250 million facility will rely on clean-burning natural gas supplied by the new Gulfstream Pipeline, which is currently under construction. As previously announced, the Osprey Energy Center will provide output under long-term contract to Seminole Electric Cooperative Inc. Calpine currently owns and operates an existing 150 MW cogeneration facility in Auburndale, and will expand its existing Auburndale plant this summer by adding a 100 MW peaking unit at the site. Calpine has announced its intent to invest more than $750 million to help supply Florida’s fast-growing electric power market. In addition to the now-approved Osprey project, Calpine is continuing to move forward with the proposed 1,080 MW Blue Heron Energy Center, to be located in Indian River County west of Vero Beach.
Tractebel SA of Brussels, Belgium, which acquired Cabot LNG in Everett, MA last year, said Thursday it would not exercise an option to buy an equity stake in a second liquefied natural gas tanker, but remained committed to the U.S. market and the long-term agreement to purchase one LNG tanker from Norwegian-based Bergesen. Tractebel announced it had entered into a 20-year charter agreement with Bergesen for a 138,000 cubic meter carrier in early June, scheduled for delivery in 2003. The carrier would be used to transport LNG from Trinidad to the Cabot facility. The Cabot terminal is also used to import LNG from Algeria, and currently has a vaporization capacity of 12.4 million cubic meters a day. Tractebel has said it wants to increase the capacity to three times that level over an unspecified time period.
UGI Corp. announced that its energy marketing subsidiary, UGI Energy Services Inc., has agreed to acquire the gas marketing business of PG Energy Services Inc., a subsidiary of Southern Union Co., effective July 1, 2001. UGI Energy Services, which does business as GASMARK and POWERMARK, will assume the existing sales and supply agreements for approximately 500 commercial and industrial customers of PG Energy Services. All employees associated with PG Energy customer accounts will join UG Energy Services. Terms of the transaction were not disclosed. The acquisition is expected to increase GASMARK sales volume by over 30%, increasing its annual revenues to over $400 million and making it one of the region’s largest energy marketing companies.
ICA Fluor Daniel, the Mexico-based joint ownership company of Fluor Corp. and Empresas ICA, announced that Sempra Energy awarded a $158.5 million turnkey lump sum contract to provide engineering, procurement and construction services for a new power generation facility. Located in Mexicali, Baja California, Mexico, the plant will be connected to the U.S. grid via a 230,000-volt transmission line and will help to ensure that the border region has adequate infrastructure to meet its future energy needs. The project, which is expected to be completed in 26 months, will have a capacity to generate 600 MW of electricity produced by two gas turbines with heat recovery systems.
KCS Energy Inc. announced it has completed the acquisition of interests in the oil and natural gas West Mission Valley Field and other minor properties located primarily in Victoria County, TX for approximately $24.7 million. According to KCS, the properties acquired include approximately 19.6 Bcfe net proved reserves (estimated by Netherland, Sewell and Associates Inc.), approximately 10,000 leasehold acres, several associated drilling prospects and other workover opportunities. The properties are currently producing 13,700 Mcfe/d, with an average KCS working interest of 42.5%. “This acquisition further expands our interests in the South Texas Wilcox trend, which is a key focus area for the company” stated James W. Christmas, CEO of KCS Energy. “With this acquisition and our recent drilling results, we are raising our 2001 production guidance for the second time this year. We are now forecasting working interest production to be between 41-44 Bcfe for the year, which is an increase of 6%-14% over our 2000 production levels.” Houston-based KCS is an independent energy company engaged in the acquisition exploration and production of natural gas and crude oil with operations in the mid-continent and Gulf Coast regions.
In preparation for Texas’ deregulated power market, Houston’s Rice University has signed a multi-year power supply agreement with Reliant Energy Solutions. The contract lowers the university’s power cost by about 20% over its current regulated rates, the company said. Terms of the transaction were not disclosed. “Reliant was able to structure an agreement that offers significant savings and enables us to take full advantage of the state’s deregulated electricity market,” explained Bill Mack, associate vice president for facilities and engineering at Rice University. “It was important for us to extract the optimum value from our cogeneration facility.” Reliant Energy Solutions is an integrated energy service company that helps commercial, industrial and institutional clients reduce costs, manage price risks and improve operating efficiencies by supplying energy and providing Internet-based services, facility improvements, financing, operations and maintenance.
FPL Energy LLC, a subsidiary of FPL Group, announced it has initiated full operation of the 30 MW Montfort Wind Farm, the largest wind-generating facility in Wisconsin. Electricity generated at the facility, located in the Iowa County town of Eden, is being sold under multi-year contracts to Wisconsin Electric-Wisconsin Gas, a subsidiary of Wisconsin Energy Corp., and Alliant Energy-Wisconsin Power and Light. FPL said the farm, which consists of 20 1.5 MW Enron wind turbines atop 215-foot towers outfitted with 110-foot blades, generates enough electricity to power 10,500 Wisconsin homes. “We couldn’t have asked for a better reception,” said Lew Hay, FPL Group CEO. “The Montfort project was textbook perfect from start to finish. From clean, efficient energy to an improved tax base and totally compatible land use, it has been an excellent demonstration of the mutual benefits to be realized when communities actively partner with project developers.” As the nation’s largest generator of wind power, FPL Energy operates wind facilities exceeding 1,000 MW of capacity in Iowa, Texas, Minnesota, Wisconsin, Oregon and California, and has a net ownership of approximately 600 MW. The company also has four wind projects under construction that will add nearly 850 additional megawatts to its portfolio by the end of 2001.
Energy Search Inc. announced that it will hold a special meeting of its common and preferred shareholders on July 19 in Knoxville, TN, to vote on a proposal to approve the merger of Energy Search and EOG Resources Inc. and to approve the transactions proposed by the merger agreement. If the merger and related transactions are approved, shares of Energy Search common stock and preferred stock will be converted to the right to receive $8.22 in cash. Only those persons who owned common stock or preferred stock of Energy Search at the close of business on the first of June will be entitled to vote on the proposal. The board of directors of Energy Search said it unanimously recommends that stockholders vote for the merger proposal. Under the agreement first announced in late May, EOG Resources said total consideration for Energy Search would equal about $37.6 million. Energy Search is an independent oil and gas exploration and production company focused primarily on developmental drilling and production of natural gas reserves in the Appalachian Basin. Energy Search holds 75 Bcfe of reserves and produces about 7 MMcf/d of Appalachian natural gas. Its proven reserves increased 17.9% in 2000 compared to 1999.
Great Plains Power Inc. has entered into a memorandum of understanding with Babcock & Wilcox to pursue the development and construction of up to five coal-fired power plants in the range of 500 to 900 MW each. Throughout the central states, Great Plains Power is developing several sites that are suitable for coal-fired generation. The Kansas City Power and Light Co. subsidiary’s initial focus for construction will be at Weston Bend I, a site near Weston, MO. It is anticipated that this plant will be in operation by 2005. Great Plains will soon issue a request for proposals for off-take contracts for capacity and energy from the Weston Bend I project. This process will allow interested parties to participate in the project through purchase power agreements for unit contingent capacity and energy at an anticipated minimum block size of 50 MW.
Montana Power Co. has finalized an agreement that buys out the remaining term of a power supply contract with Advanced Silicon Materials LLC. Montana Power said the action removes its exposure to uncertain future energy prices, while allowing the silicon production plant just west of Butte to obtain a longer-term electricity supply from another provider. The agreement involves a one-time payment by Montana Power of $62.5 million to Advanced Silicon and ends, as of June 30, the power supply contract that was in effect until yearend 2002. Montana Power said this transaction is another step forward as the company exits the energy business and completes its transition to a stand-alone telecommunications company.
International Power announced that it has filed an Article X application with the New York State Board on Electric Generation and Siting and the Environment seeking approval to build and operate a new 580 MW natural gas-fired power plant in Brookhaven, Long Island. The Article X application addresses environmental and other matters related to the siting of an energy generating facility in New York State. The filing begins a 60-day period for the siting board to determine whether the application is complete. Once a completeness determination is made, the siting board has one year to make a final decision on the application.
Houston-based Apache Corp. is finding sweet success along the Outer Continental Shelf of the Gulf of Mexico, reporting that it has made five discoveries and 13 successful development wells — moving it up as the fourth ranked OCS producer for the first half of 2001. With the new wells, Apache’s current net production along the OCS is 345 MMcf and 34,000 b/d. In the Gulf of Mexico alone, Apache now has 169 operated platforms and 489 active operated wells, and plans to spend $300 million this year for drilling and recompletion activities and facilities. It also has eight rigs in operation there, and expects that its Gulf operations will contribute almost $400 million of cash flow in the first half of 2001. Among its latest discoveries, Apache has completed two dual-zone new-fault discovery wells on Grand Island Block 33, which are expected to come on stream in early August. The wells have an anticipated combined flow rate of 13.3 MMcf/d and 1,160 b/d of liquid hydrocarbons. The discoveries will be tied into existing production facilities on the block. A new-fault discovery on North Padre Island Block A-12 is expected to come on stream in the fourth quarter at an anticipated rate of 10 MMcf/d. Apache also has two discoveries on its South Timbalier 295 block, which came on production at a combined initial rate of 2.2 MMcf/d and 1,848 b/d. The wells were sidetracked from an existing platform, and the company is now drilling a third well at the same location.
Constellation Energy Group achieved a major milestone in its agreement to purchase the Nine Mile Point Nuclear Station by obtaining approval from the Nuclear Regulatory Commission (NRC) last week for the transfer of the plant’s operating licenses to Nine Mile Point Nuclear Station, LLC, a subsidiary of Constellation Nuclear, LLC. Niagara Mohawk Power Corp. is the sole owner and operator of Nine Mile Point Unit 1 and the operator and a co-owner of Unit 2, located in Scriba, NY. Co-owners of Unit 2 also include New York State Electric & Gas Corp., Rochester Gas & Electric Co., Central Hudson Gas & Electric Corp., and Long Island Lighting Co. (LILCO). LILCO will remain a minority owner of Unit 2. Constellation Nuclear in December 2000 announced its agreement to purchase 100% of Unit 1 and 82% of Unit 2, equaling 1,550 MW of Nine Mile Point’s total generating capacity of 1,757 MW. Unit 1 is a 609 MW reactor that entered service in 1969, while Unit 2 is a 1,148 MW reactor that began operation in 1988. Constellation Nuclear applied to the NRC on Feb. 1, 2001, for the transfer of Nine Mile Point’s operating licenses.
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