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Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: quoted-printable X-From: IssueAlert@SCIENTECH.COM X-To: ISSUEALERTHTML@LISTSERV.SCIENTECH.COM X-cc: X-bcc: X-Folder: \MHAEDIC (Non-Privileged)\Inbox X-Origin: Haedicke-M X-FileName: MHAEDIC (Non-Privileged).pst Today's IssueAlert Sponsors:=20 <http://www.energyventurefair.com/<; We are seeking 75 of the most promising energy-based technology and service= companies to present at Energy Venture Fair II, January 29 & 30, 2002, Hou= ston, TX-the follow-up to the explosively successful Energy Venture Fair I = held in Boston in June. If you are a Senior Executive from one of these com= panies, and are interested in having a platform to present your vision and = business plans before a national audience of investors, please contact Nann= ette Mooney at (818) 888-4445, Ext. 11, for more information, or via email = at nannettem@energyventurefair.com <mailto:nannettem@energyventurefair.com<= . APPLY TODAY - SPACE IS LIMITED.=20 <http://www.energyventurefair.com<;=20 <http://secure.scientech.com/specialpages/maps.asp<; <http://www.secure.s= cientech.com/images/spacer.gif< <http://secure.scientech.com/specialpages/G= as_Maps.asp< Electric Power System & Natural Gas System Maps are available from SCIENTECH, Inc. Click here for full descriptions and prices of Electric <http://secure.scie= ntech.com/specialpages/maps.asp< and Gas <http://secure.scientech.com/speci= alpages/Gas_Maps.asp< Maps. <http://secure.scientech.com/rci/wsimages/scientech_logo_small.jpg< <http://secure.scientech.com/rci/wsimages/IssueAlert_Logo_188.jpg< October 12, 2001=20 Mirant Becomes No. 2 Gas Marketer;=20 New Acquisition Cements Canada as Top Spot for Gas Resources=20 By Will McNamara Director, Electric Industry Analysis=20 <http://secure.scientech.com/rci/wsimages/will100border_copy.jpg< [News item from PR Newswire] Mirant Corp. (NYSE: MIR) announced on Oct. 11 = that it intends to acquire the majority of the gas marketing business of Ca= lgary-based TransCanada Pipelines Limited, a move that would make the compa= ny the largest natural-gas marketer in Canada, the largest natural-gas expo= rter to the United States and the number-two gas marketer in North America.= Terms of the purchase were not disclosed, although it is expected to close= in the fourth quarter of this year, pending approvals from regulators, pro= ducers and customers.=20 Analysis: It's nothing short of amazing the number of natural-gas transacti= ons that have taken place between U.S. integrated energy firms and Canadian= gas companies in 2001 alone. As is often the case, what seemed like a tren= d now appears to be an industry standard, as those U.S. power firms consoli= dating in the natural-gas sector look northward to Canada for acquisition t= argets. Canada, which offers seemingly abundant natural-gas resources, has = attracted such U.S. energy companies Calpine, Devon and Duke, which have al= so bought gas outlets in the Great White North this year. This particular a= cquisition is significant because it positions Mirant, which already had as= sets in the Western part of Canada, as the largest gas marketer in Canada a= nd right behind Enron elsewhere in North America, especially in the U.S. Mi= dwest and Northeast. Further, the purchase of TransCanada gives Mirant a de= cided edge on the increasing exports of natural gas from Canada to the Unit= ed States, adding upon its already-significant portfolio.=20 As always when discussing a merger or acquisition, I like to first establis= h the key elements of the deal before addressing the larger strategic gains= of the parties involved. Mirant is of course the recently spun off, former= subsidiary of Southern Company which over the last year has become one of = the most aggressive and visible energy companies operating in the unregulat= ed wholesale sector. The company's business model is founded on building a = huge arsenal of generating assets, particularly based in natural gas, which= can be marketed and traded in strategic regions. Even before the announcem= ent of this acquisition, Mirant owned an estimated 96 billion cubic feet of= proven oil and gas reserves, 82 percent of which are natural gas. Accordin= g to the company, a substantial portion of its 38 million cubic feet equiva= lent per day that is in current production is contracted to be sold at an a= verage fixed price of $4/MMBtu through 2002. Further, Mirant has establishe= d a solid reputation as a leading gas marketer and trader in North and Sout= h America, Europe, and Asia. The purchase of TransCanada's gas marketing bu= siness will add 5.1 billion cubic feet per day of gas reserves to Mirant's = existing volumes (based on TransCanada's 2000 trading volumes), which as no= ted significantly elevates Mirant's stature in the gas-marketing space.=20 The most important thing to note about TransCanada's business model is that= the company has established a strong niche in transporting natural gas fro= m Alaska's Prudhoe Bay and Canada's Mackenzie Delta into the growing North = American marketplace, supporting two separate pipelines (one from each basi= n). This has been a slow-growth business for TransCanada, and in fact has l= ost money over the last year, but is positioned for strong growth in the fu= ture given the projected increase in demand for natural gas in North Americ= a. TransCanada has been attempting to sell its gas marketing business for s= ome time in an effort to focus more exclusively on its North American gas t= ransmission and electrical power services. Last month, the company sold ano= ther chunk of its U.S. natural-gas marketing and trading operations to BP G= as and Power. Some of the motivation for TransCanada to focus exclusively o= n this business might have arisen from concerns about perceived conflicts b= etween its marketing / shipping business and pipeline systems.=20 From a broad perspective, this is a good move for Mirant. As noted, the com= pany already has assets in Western Canada, where it has operated since June= 2000 through its management of the natural-gas marketing operations of Pan= -Alberta Gas Ltd. and CanWest Gas Supply, Inc. The purchase of core busines= ses of TransCanada extends Mirant's presence into Eastern Canada by gaining= control over TransCanada's Quebec and Ontario operations. Specifically, Mi= rant gains control over TransCanada's natural-gas trading and marketing bus= iness and the related transportation and storage contracts, with business c= ontracts in the Midwest and Northeast United States. In addition, TransCana= da has agreed to sell its "netback pool," or the part of its operation that= has aggregated gas supply from about 550 natural-gas producers. As noted, = the aggregated supply should increase Mirant's marketable reserves by 5.1 b= illion cubic feet per day. Although financial terms were not disclosed, a M= irant executive indicated that the acquisition would enable the company to = establish a leading market position through minimal investment.=20 The acquisition of TransCanada is by no means a surprise as it factors in v= ery well to Mirant's growth strategy. Just this week, Mirant announced that= it had acquired an interest in 18 natural-gas and oil producing fields as = well as 206,000 acres of mineral rights in South Louisiana from Castex Ener= gy. This purchase followed purchases announced last August in which Mirant = agreed to acquire two power plants in Florida and Georgia from El Paso Corp= oration. The additional generating capacity from the El Paso facilities wou= ld bring Mirant closer to its aggressive target of owning or controlling 35= ,000 MW in North America by 2005. Mirant is acquiring from El Paso a 640-MW= natural gas-fired power plant in Thomaston, Ga., and a 480-MW natural gas-= fired plant in New Port Richey, Fla., north of Tampa. The agreement is expe= cted to close this month, pending regulatory and third-party approvals.=20 As noted, Mirant is just the latest in a string of U.S. energy companies th= at have made purchases of Canadian gas companies. Driven by what appear to = be abundant natural-gas reserve fields in Canada, and uncertain resources i= n more traditional areas such as the Gulf of Mexico, the gas consolidation = movement among U.S. energy companies includes acquiring those firms that ar= e involved in both production and transportation of natural gas. Some recen= t reports I've seen have indicated that, since 1991, natural-gas imports to= the United States (mostly coming from Canada) have doubled to about 10 bil= lion cubic feet per day, while domestic production has increased only 4 per= cent (although it still averages 52 billion cubic feet per day). Further, a= ccording to the Department of Energy, U.S. imports of natural gas from Cana= da have averaged about 15 percent of total U.S. usage (during 2000, the Uni= ted States consumed 22.8 Tcf and imported about 3.6 Tcf, mostly from Canada= ). The other factor driving this interest in Canadian natural-gas firms is = the relatively lower valuations of Canadian energy stocks.=20 Worth noting in this movement is Duke Energy, which announced its purchase = of Canada's Westcoast Energy for $3.5 billion in late September. Westcoast = Energy owns the main pipeline that transports natural gas into the United S= tates, which is a booming market for natural-gas demand given its use in ne= w power plant projects. The acquisition should give Duke control over natur= al-gas supply in Canada and the pipelines needed to export it. It is import= ant to note that Duke has found its niche in the Canadian natural-gas marke= t by focusing on the transportation of the commodity. Mirant is taking a di= fferent approach by focusing on the marketing side of the business. Also wo= rth noting in the Canadian market is Devon Energy, which is buying Anderson= Exploration, which reportedly will position it as the largest independent = producer of oil and natural gas in North America.=20 Ironically, this increased interest in Canadian natural-gas firms is taking= place at a time when Canadian natural-gas storage levels could be much hig= her than reported, bringing prices down to (CAN) $1.75 per million cubic fe= et over the next few weeks. In fact, natural-gas prices in Canada have drop= ped about 80 percent since the beginning of 2001, with Alberta's benchmark = AECO-C Hub prices dropping more than 40 percent in the past two months. In = addition to the high storage levels, mild weather, a drop in consumption of= natural gas and the struggling North American economy are also considered = to be factors in the drop in prices. However, this does appear to be a temp= orary trend, and companies such as Mirant are betting that prices will once= again increase, starting with the imminent winter season.=20 Moreover, as noted the purchase of TransCanada will reportedly make Mirant = the second-largest gas marketer in North America. According to the most cur= rent data available, based on 2000 sales, Enron Wholesale Services remains = the largest natural-gas marketer in North America, with 28.3 billion cubic = feet / day of sales in 2000, representing an 82.6-percent increase over 199= 9 levels. Duke Energy Trading and Marketing, Dynegy Marketing and Trade, Co= ral Energy, and Reliant Energy round out the top companies. Interestingly, = Mirant was not even listed on the year-2000 sales ranking because it did no= t fully spin off from parent Southern Company until late in the year. Conse= quently, the ascendance into the top tier of natural-gas marketers that Mir= ant should achieve through this single purchase of TransCanada is quite imp= ressive.=20 An archive list of previous IssueAlerts is available at www.scientech.com <http://secure.scientech.com/issuealert/<;=20 We encourage our readers to contact us with their comments. We look forward= to hearing from you. Nancy Spring <mailto:nspring@scientech.com< Reach thousands of utility analysts and decision makers every day. Your com= pany can schedule a sponsorship of IssueAlert by contacting Jane Pelz <mai= lto:jpelz@scientech.com<. Advertising opportunities are also available on o= ur Website.=20 SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let u= s know if we can help you with in-depth analyses or any other SCIENTECH inf= ormation products. If you would like to refer a colleague to receive our fr= ee, daily IssueAlerts, please reply to this e-mail and include their full n= ame and e-mail address or register directly on our site.=20 If you no longer wish to receive this daily e-mail, and you are currently a= registered subscriber to IssueAlert via SCIENTECH's website, please visit = <http://secure.scientech.com/account/<; to unsubscribe. Otherwise, please se= nd an e-mail to to IssueAlert <mailto:IssueAlert@scientech.com<, with "Dele= te IA Subscription" in the subject line.=20 SCIENTECH's IssueAlerts(SM) are compiled based on the independent analysis = of SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAlerts= are not intended to predict financial performance of companies discussed, = or to be the basis for investment decisions of any kind. SCIENTECH's sole p= urpose in publishing its IssueAlerts is to offer an independent perspective= regarding the key events occurring in the energy industry, based on its lo= ng-standing reputation as an expert on energy issues.=20 Copyright 2001. SCIENTECH, Inc. All rights reserved. <http://infostore.consultrci.com/spacerdot.gif?IssueAlert=3D10/12/2001<;
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