Sempra Energy Resources, the independent power generationsubsidiary of Sempra Energy, announced plans to build a $350million, 600 MW power plant near Mexicali, Baja California, Mexico.The plant, known by its Spanish name, Termoelectrica de Mexicali,will be connected to the U.S. electric grid via a new, 230,000-volttransmission line. “Electricity from this new power plant can helpalleviate California’s energy crisis,” said Donald E. Felsinger,group president of Sempra Energy. “Energy is the lifeblood of theCalifornia/Baja California region’s economy. This power plant —along with our North Baja Pipeline — will help ensure that theborder region has adequate infrastructure to meet its future energyneeds.” The company decided to build the plant near Mexicalibecause of its proximity to a source of natural gas for fuel —the North Baja Pipeline, which begins construction this summer —and to the Southwest Powerlink, a high-voltage transmission lineconnecting California and Arizona. The power plant is expected tobegin operations in the summer of 2003, one year after the NorthBaja Pipeline is due to begin delivering natural gas to the region.The North Baja Pipeline – a $230 million, 215-mile pipeline jointlybeing developed by Sempra Energy International, PG&E Corp.’sNational Energy Group, and Proxima Gas S.A. de C.V. of Mexico -will bring natural gas from the Arizona border to fuel businessesand new power plants being built in Baja California.
Houston-based independent KCS Energy Inc., which is emergingfrom bankruptcy, announced it has signed a production agreementwith Enron North America Corp. to sell about 17.3% of its oil andgas reserves over the next five years for $176 million. KCS heldnearly 277 Bcfe of reserves in 2000. The Enron deal, as well asproceeds from issuing $30 million in preferred stock and cash, wereused to repay KCS’s two bank credit facilities and $60 million ofsenior notes. Approved by the U.S. Bankruptcy Court for theDistrict of Delaware, the plan also gives KCS money to pay itstrader creditors, the $90 million principal amount of its seniornotes and $125 million principal amount of senior subordinatednotes with no change in interest rates. Shareholders will retain100% of their common stock. The independent energy company’sbusiness is centered on the Midcontinent and Gulf Coast regions,and it also purchases reserves through its Volumetric ProductionPayment program. It began to reorganize in 2000, and the approvedplan was the third one offered.
A Virginia State Corporation Commission hearing examiner hasrecommended that the planned merger between NUI Corp. and theVirginia Gas Co. include a condition that may affect the locationof an intrastate gas pipeline near Roanoke. The merger and proposedconditions require SCC approval and the commission must act byMarch 27. Under terms of the proposed merger, NUI will acquire VGCand its three operating subsidiaries, Virginia Gas DistributionCo., Virginia Gas Storage Co. and Virginia Gas Pipeline Co. Throughits subsidiaries, VGC markets, stores, distributes, gathers,explores and produces natural gas, and the company has beenextensively expanding its capabilities throughout southwesternVirginia. It also has constructed a 45-mile natural gas pipelinefrom Radford to Roanoke that the SCC approved in December 1999.However, before approving the merger, the SCC must be satisfiedthat the transfer won’t jeopardize rates and service to Virginiacustomers. SCC Hearing Examiner Alexander F. Skirpan Jr. wants theproposed merger to include a condition that requires VGC toconsider locating its new pipeline within the right-of-way of anyexisting pipeline inside the SCC-approved 1,000-foot corridor.
The Pennsylvania Public Utility Commission has approved atentative settlement agreement with Equitable Gas Co. following anexplosion in September 1998 that killed one person. The explosionoccurred after an Equitable employee failed to accurately mark agas line to a home for repair by Duquesne Light Co. Duquesne Lightthen damaged the line, which caused the explosion in McKeesport,PA. Under terms of the settlement, Equitable will enhance itsdamage prevention program by improving the process of how itinspects pipeline facilities, which will require employees toperform site inspections during and after excavation work to verifythe integrity of a pipeline. Equitable also will conduct moretraining for its street crews and customer service employees, andagreed to spend $100,000 to train smaller, regulated utilities thatmay not be able to afford extensive training in damage prevention,leak management and safety and operator qualification. Equitablewould not be able to recover the costs involved with enhancing itsprogram in any future ratemaking procedure, said the PUC.
Dynegyconnect LP, a new e-business subsidiary of Houston-basedDynegy Inc., has launched an Internet service that allows serviceproviders to expand their networks or add access to theirportfolios. The service is designed to assist Dynegy’s current andfuture customers to be more competitive in the workplace throughthe Internet. Dynegyconnect Internet service provides accessservices at DS3, OC3 and above, and gives the user options to formmultiple peering and transit relationships. It also allows users toselect and pay only for the bandwidth it needs with flat-rate,tiered or burstable billing options. The Denver-based company,which is a joint venture of Dynegy and Telstra Corp. Ltd., is nowdeveloping a nationwide optically switched data network that willhave nearly 16,000 route miles and more than 40 points of presenceby the fourth quarter of this year. Dynegyconnect selected FujitsuNetwork Communications Inc., a subsidiary of Fujitsu Ltd., as itsequipment and services provider. Fujitsu will be the primarysupplier of division multiplexing equipment and services, and willincrease the network capacity by simultaneously transmitting up to176 channels, each capable of carrying 10 gigabits per second oftraffic through a single fiber.
Duke Energy North America (DENA) is making good on its promiseto bring a significant amount of new electricity generation onlineby summer 2002. The company broke ground last week on itspreviously announced Arlington Valley Energy Facility located inMaricopa County, AZ. The 570 MW natural gas-fired facility isexpected to cost upwards of $250 million. DENA expects the projectto take about 18 months and be in service in time to supplyelectric power to the wholesale market by summer 2002. The facilityrecently completed the required permitting process and has gainedapproval from Maricopa County and the Arizona CorporationCommission. DENA said the plant will supply enough energy to lightand heat 570,000 homes, greatly increasing the reliability of thepower generating market in Arizona and the Southwest. DENA saidearlier this month that it currently has 6,200 MW in itselectricity generating portfolio, with an additional 6,000 MW ofnew power generation capacity in place by summer 2002.
Moody’s Investors Service assigned a Baa2 issuer rating toPG&E National Energy Group Inc. (NEG) and confirmed the ratingsof subsidiaries, PG&E Gas Transmission-Northwest (GTN: seniorunsecured debt at Baa1) and PG&E Generating Co. LLC (PG&EGen: bank loan rating of Baa2). PG&E Gen’s rating is removedfrom review for possible downgrade where it was placed on Jan. 29,2001. The ratings of PG&E Gen’s subsidiaries are alsoconfirmed. The rating outlook for NEG and all rated subsidiaries isstable. The Baa2 issuer rating reflects the consolidated strengthof NEG’s business units, including the cash flows and operatingincome from GTN, PG&E Gen, USGenNE, and PG&E EnergyTrading, Moody’s said. Of particular note is the amount of cashflows provided by highly predictable sources, including theregulated cash flows coming from GTN, the dividends sourced by thecontracted portfolio of PG&E Gen and the cash flows expectedfrom the standard offer tariff customers of USGenNE. NEG’s Baa2issuer rating incorporates the legal ring-fencing structureimplemented by PG&E Corp. on Jan. 12 to insulate the creditquality of NEG and its subsidiaries from the effects of any creditdeterioration at PG&E Corp. Specifically, PG&E Corp.established PG&E National Energy Group LLC (NEG LLC) as abankruptcy-remote entity and the direct parent of NEG. PG&ECorporation contributed 100% of the issued and outstanding sharesof NEG to NEG LLC. Specific provisions were established which helpto insulate NEG from the financial condition and the creditors ofits parent company.
Westcoast Energy reported that colder than normal weather, taxrate reductions and strong performance from its BC Pipeline, EngageEnergy and Union Gas business units led to record net income lastyear of $340 million, compared with $222 million for 1999, anincrease of 53%. Earnings per common share were $2.92 in 2000,compared with $1.95 in 1999. Included in the 2000 earnings is$0.40/share from implementing the substantively enacted corporateincome tax rate reductions. Results for 1999 include the sale ofCentra Gas Manitoba of $0.52 per common share. Adjusting for theseitems result in earnings per common share of $2.56 for 2000compared with $1.58 for 1999, an increase of 62%. “I amparticularly pleased with the turnaround in our services businesseswhich generated an improvement of $77 million over last year,” saidCEO Michael Phelps. “In particular, Engage Energy contributed $26million to net income this year compared with $5 million lastyear.” He added that Westcoast’s shareholders benefited from atotal return of 62% on their investment over the past year and an18% return per year over the past five years.
Mitchell Energy & Development increased its proven gasequivalent reserves for the thirteenth consecutive year duringcalendar 2000. The company added a net 530 Bcfe of gas to itsreserve base and finished the year with 1.5 Tcfe of gas reserves,of which 95% is gas. The increase represents a 412% replacement ofthe 129 Bcfe produced during the year. Mitchell also reportednatural gas liquids reserves of 175 million barrels. The recordlevel of gas equivalent reserves was driven largely by the successin the Newark East Barnett shale field where step-out drillingusing light sand fracture completion technology expanded thefield’s economically developable area. Over 600 wells drilled todate have proven up 91,000 acres of the total 230,000 acres heldwithin the play and the company is proceeding with a planned 12-rigprogram to further develop and extend the proven area. “Last year’sreserve increase resulted from evolving technology that allowed usto increase per well reserves 25%, and step-out drilling thatexpanded the proven area 50%,” said CEO George P. Mitchell.
The Bonneville Power Administration’s rates staff reached apartial settlement with many of its utility customers overwholesale power rates for the five-year period beginning Oct.1. Theagreement, part of a new BPA rate proposal, results in rates thatwill be adjusted every six months based on actual demand for BPApower and the prices BPA has to pay in the wholesale market. Afinal decision by the BPA administrator on wholesale power rateswill be made at the completion of the rate case in June. Theproposal comes after several months of discussion during which itbecame clear that BPA rate increases could average 60% or more overthe five-year period. Originally, BPA had proposed a fixed rate foreach year. “We had been on a course for fixed rates but, given thevolatility of the market, that strategy just wasn’t going to work,”said BPA Senior Vice President for Power Paul Norman. “While aflexible rate that can change every six months does not fully meetthe stability goal we had hoped for, it does meet our fundamentalgoal that we collect adequate revenues to cover our costs but nomore revenues than we actually need. This proposal effectivelyaddresses the turbulent market we are operating in.” The analysison the variable rates shows a wide range of potential rate impacts,from a 2.4% increase to add 500 MW in a $30/MWh market, to a 453%increase to acquire 3,000 MW in a $325/MWh market. Actual rateswould depend on market conditions, customer actions, consumerenergy conservation and BPA management actions. For moreinformation visit BPA’s web site.
During a time of mega-deals, PG&E National Energy Group(NEG) reported that it has entered into one of the U.S. powerindustry’s largest with GE Power Systems’ Energy Services unit.Bethesda, MD-based NEG entered into a long-term service agreementfor more than $1 billion. Under the agreement, GE will supplyparts, services and repairs for more than 20 GE gas-fired turbinesat power plants to be developed by NEG throughout North America.The maintenance will take place for the life of the 12-yearcontract. “The agreement with PG&E National Energy Group is anoutstanding example of how power producers in today’s competitivemarket recognize the value of forming service relationships withcompanies that can help them extract the greatest sustainedefficiency and reliability from their power plants,” said RicardoArtigas, president of GE Energy Services, the global services armof GE Power Systems. GE said it has received orders or commitmentsfor more than 1,000 of its F-class gas-fired turbines over the lastdecade. The company said it currently has $17 billion incommitments for long-term service agreements and operation andmaintenance agreements for power plants worldwide.
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