Piedmont Natural Gas reported Tuesday that it has closed on its purchase of North Carolina Gas Service (NCGS), the North Carolina natural gas distribution division of NUI Corp., for approximately $26 million. First announced in mid-May, the sale agreement has received all necessary regulatory approvals. NCGS delivers gas to approximately 14,000 customers in Rockingham and Stokes counties, which are contiguous to Piedmont’s existing service territory. Piedmont said the purchase is consistent with its core business growth strategy, which includes pursuing acquisitions and business ventures in the growing southeastern markets. The companies both agreed on a smooth transition to ensure that customers of NCGS will not experience any inconveniences as a result of the sale. Piedmont immediately began serving North Carolina Gas customers upon completion of the sale, and is sending letters to all former NCGS customers informing them of the change in ownership. Piedmont said for the time being former customers of North Carolina Gas Service may use the same telephone numbers that they have been using for gas service, emergency or billing questions. Charlotte-based Piedmont distributes natural gas to 725,000 residential, commercial and industrial customers in North Carolina, South Carolina and Tennessee. The company is the second-largest natural gas utility in the Southeast.

San Jose, CA-based Calpine Corp. completed its previously announced sale of oil and gas assets in British Columbia to Calgary-based Pengrowth Corp. for approximately US $243.7 million. The company said that of the total consideration, which exceeds book value, Calpine received a US$155.3 million cash payment from Pengrowth; the remaining US$88.4 million was paid from the purchase in the open market and tendering of Calpine debt securities by Pengrowth. The sale is part of an ongoing effort by Calpine to shed more than a half-billion dollars in nonstrategic assets this year to improve its liquidity and cash balance by the start of next year. “This asset sale provides Calpine an excellent opportunity to improve our balance sheet,” said Bob Kelly, Calpine’s CFO. “With the acquisition of our securities, we will reduce our debt outstanding by $197.4 million, record a gain of approximately $111.1 million and lower our annual interest expense on these securities by approximately $16.6 million.” Calpine said the cost of $88.4 million to Pengrowth to acquire the securities included a market cost of $82.9 million, accrued interest of $4.5 million and fees of $1 million. The face value of the securities purchased and tendered to Calpine was $197.4 million, consisting of five different senior note securities with varying maturation dates, 2008-2011.

Pure Resources Inc. said the special committee of its board of directors is reviewing a revised exchange offer from Unocal Corp., but made no comment on whether a raised offer was enough to purchase the remaining 35% shares Unocal does not own of the company. Unocal, which owns 65% of the company, has been attempting through subsidiary Union Oil Company of California to obtain the rest of the shares for several weeks. Pure Resources’ special committee obtained an injunction early last week to prevent Unocal from completing the initial exchange offer, after it determined that the initial bid was inadequate and not in the best interests of its shareholders. Unocal then upped its offer, increasing the ratio for each Pure Resources share from 0.6527 to 0.70 for each Unocal share that is exchanged. Pure Resources, which was formed in May 2000 through a combination of Titan Exploration Inc. and Unocal’s Permian Basin business unit, develops and produces oil and natural gas in the Permian Basin, the San Juan Basin, the Gulf Coast and the Gulf of Mexico. It also owns an undivided interest under approximately 6 million gross fee mineral acres throughout the southern Gulf Coast region of the United States.

The Missouri Public Service Commission late Thursday unanimously approved an overall settlement on a natural gas rate case filed last January by Laclede Gas Co., the largest natural gas distributor in the state. The new gas service rates approved will increase a typical residential customer’s average monthly gas bill by approximately $1.76 a month. The agreement includes new rates designed to improve the company’s recovery of its distribution by $14 million annually; a moratorium on additional rate filings through March 1, 2004; and an innovative system of rate design that should mitigate the impact of weather volatility. The settlement also is expected to stabilize Laclede Gas’ revenue flow without changing the overall rates paid by its 630,000 customers in St. Louis and surrounding eastern Missouri counties. The rate decision does not impact the cost to obtain natural gas, which typically represents about two-thirds of a customer’s bill, said Laclede Gas, which is a subsidiary of The Laclede Group. The new rate design provides Laclede with the ability to recover its distribution costs, which are essentially fixed, in a way that is significantly less sensitive to weather. In a colder-than-normal winter, when bills are likely to be higher because of increased customer usage, Laclede’s customers will not be charged more than the company’s actual distribution costs. Conversely, in a warmer-than-normal winter, when bills are likely to be lower, the rate structure will prevent any significant weather-related under-recovery of these actual distribution costs.

OG&E Electric Services, which serves more than 700,000 customers in a 30,000 square-mile area of Oklahoma and western Arkansas, has entered into an agreement in principle with the Oklahoma Corporation Commission (OCC) staff, the Oklahoma attorney general and other parties to settle a rate case that was pending before the commission. The agreement’s details were not disclosed. In September, OGE Energy CFO James R. Hatfield had testified that a rate-cut proposal by the staff of OCC would impair OG&E’s ability to respond to power outages, especially following storms, because the recommendation would require the company to reduce its staff (see Power Market Today, Sept. 10 ). OCC staff had recommended that OG&E cut its rates by $39.1 million. Meanwhile, the state attorney general and consumer groups had requested a rate reduction of up to $90 million. However, OGE requested a $26 million rate increase to upgrade Oklahoma’s electric system, which was damaged by storms and increased power loads.

ArcLight Capital Partners LLC has closed on the first fund dedicated to investments in the U.S. power sector. The $950 million ArcLight Energy Partners Fund I LP already has attracted more than 20 institutional investors, including John Hancock Life Insurance Co., WestLB AG, Stanford University and CDP Capital-Americas. The Boston-based equity fund was set up about a year ago by two energy professionals, Daniel R. Revers and Robb E. Turner, who will manage the fund with several other principals. They are expected to avoid takeover investments and focus on power assets, many of which are now for sale from financially strapped energy merchants. The fund will make equity and equity-like investments in generation, transmission and distribution, as well as power-related fuel, services and equipment assets. Last year, John Hancock gave ArcLight about $400 million, which was used to invest in 14 power and power-related investments, including generation plants, coal mines and a natural gas storage facility. For the new equity fund, Lehman Brothers served as global placement agent. “The power and energy sector is going through unprecedented change, creating unique private equity opportunities for knowledgeable investors,” said Revers, a former John Hancock executive. “The size and complexity of the industry, coupled with recent market turmoil, has effectively closed access to the public markets for power companies, making the power industry one of the largest and most attractive investment areas for private equity.”

The Virginia State Corporation Commission (VSCC) has approved Virginia Natural Gas’ (VNG) request to use a weather normalization adjustment (WNA) to reduce the effect of weather on customer’s natural gas bills. The company also committed not to file for a general rate increase for at least two years. The groundbreaking WNA decision makes VNG the first company to receive such an approval in the state. The two-year rate freeze commitment extends the time since VNG’s last rate increase in 1996 to eight years. VNG filed the application for the WNA with the VSCC in April. “After the experiences of the last two winters — record-breaking cold temperatures and high commodity prices in 2000 and warmer-than-normal weather in 2001 — we felt a change from past practice was needed,” said Hank Linginfelter, VNG president. “Periods of extended cold weather followed by extended warm weather have been disruptive to gas customers and VNG. “The adjustment will provide revenue stability enabling us to better plan and schedule system maintenance and improvements which contribute to operational quality and pipeline safety,” Linginfelter added. “Customers will receive those benefits plus the advantage of lower bills in colder weather.” With the WNA in place, customer’s bills will be reduced when winter weather is colder-than-normal and surcharges will be added to bills when the weather is warmer-than-normal. VNG said a factor based on usage by customers and weather conditions during each billing cycle will be used to determine the credit or surcharge. VNG, a wholly owned subsidiary of AGL Resources Inc., provides retail natural gas sales and distribution services to 245,000 customers in southeastern Virginia.

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