In a non-binding letter of intent signed last Thursday,Houston-based Vastar Resources agreed to sell its 40% stake inSouthern Company Energy Marketing to its partner, Atlanta-basedSouthern Energy for $40 million. Southern Energy is a subsidiary ofSouthern Co.

James Peters, a Southern Co. spokesman, said that the tentativeagreement remains subject to both boards’ and regulatory approval.Vastar is expected to record a gain on the sale of SCEM, but itspending merger with BP Amoco may reduce future earnings. The BPmerger is expected to be voted on by Vastar stockholders inSeptember.

Vastar first combined its gas marketing operations with SouthernEnergy Inc. in late 1997 to form the unregulated energy marketing armSouthern Company Energy Marketing (see Daily GPI, Jan. 29, 1998). At the time of thepartnership, Vastar received a $40 million cash payment from SouthernCo., and it was recorded as a gain of $33.9 million. It was formed tofocus on the wholesale marketplace of utilities, municipalities andcooperatives. It also deals with weather derivatives.

Earlier this month, SCEM reported that its second-quarterelectricity sales had declined slightly from 1999, but said thatits natural gas sales had increased. SCEM sold 46.7 MM MW hours ofelectricity during the second quarter of 2000, compared with 49.4MM MW in 1999. It sold 5.9 Bcf/d of natural gas in the secondquarter, up from 4.3 Bcf/d for second quarter 1999.

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