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Enron Mail |
El Paso Closer to Acquiring PG&E's Texas Assets
El Paso Energy Corp. is closer to acquiring PG&E Corp.'s Texas gathering and liquids businesses for about $840 million in stock and debt after signing a consent agreement earlier this week. The deal includes 8,500 miles of natural gas transmission pipelines that transport about 2.8 Bcf/d, nine processing plants that process 1.5 Bcf/d, and a 7.2 Bcf natural gas storage field. PG&E National Energy Group bought the properties about three years ago from Valero Energy and Teco for $1.02 billion, but had been unable to turn a profit. When it purchased the properties, PG&E paid a premium price to enter the west-east gas transportation market. However, since the sale, the basis between Waha in West Texas and Katy and the Houston Ship Channel has tightened and PG&E could not overcome the roadblocks to become a major player. The assets, which also include significant natural gas liquids pipelines and fractionation facilities, serve all of Texas' major metropolitan areas, large industrial load centers and several natural gas trading hubs. The book value before the sale to El Paso was estimated to be between $2.5 billion and $2.7 billion. Before buying PG&E's assets, El Paso was already an experienced player in the liquids game. When the deal was first announced, El Paso said that 70% of the cash flow generated by the Texas assets came from stable fee-based activities with the balance from processing. El Paso, which is close to completing a merger with The Coastal Corp., expects to actively manage the risk on the non-fee-based side. As part of the normal review process, the consent agreement signed this week is subject to the approval of the Federal Trade Commission. El Paso also has to finalize a similar agreement with the State of Texas. Once the agreements are approved, El Paso Energy expects to close the transaction in the fourth quarter. ------------------------------------------------------------------------------ --
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