UPDATE:Centrica North America Unit Shops For Gas, Power Assets

The North American unit of the U.K.'s Centrica PLC (CNA.LN) is looking to buy power plants and natural gas production assets to support its energy-marketing businesses in the U.S. and Canada, its chief executive said Tuesday.

The subsidiary, Direct Energy Marketing Ltd., will focus its asset search on power plants in Texas and the Northeast U.S., including the 13-state PJM Interconnection power market. The company will look to add gas-production in western Canada, while exploring an expansion into North American shale gas, possibly through an acquisition or joint venture.

"We are interested in shale gas. It is a phenomenon," said Direct Energy Chief Executive Chris Weston in a phone interview.

Direct Energy is tracking two industry trends in North America. Several U.S. power companies are looking to pick up plants, with companies such as Constellation Energy Group Inc. (CEG) looking for generation to match the loads of its retail businesses. At the same time, energy companies are expanding further into the production of gas from deeply buried shale-rock formations.

The unit of London-based Centrica is looking to acquire assets to reduce exposure to commodity markets and cut the associated capital needs. Direct Energy's retail businesses rely heavily on buying--rather than producing--gas and electricity to supply customers. It operates gas wells in Alberta, Canada, and gas-fired power plants in Texas.

"We want to ensure we get a better balance between upstream and downstream," Weston said.

Direct Energy's power business only produces 10% of the electricity it supplies, while the gas business produces 20%. The company aims to have enough supplies to meet 35% to 40% of its power and gas needs.

On the power generation side, Weston said Direct Energy is most interested in gas-fired plants used to meet intermediate and peaking demand in Texas and the Northeast, including the PJM market, New York and New England. He added the gap between what buyers are willing to pay and the price at which plant owners are willing to sell has been narrowing, lowering a barrier that has kept asset deals from getting done.

As for gas, Direct Energy will concentrate in Western Canada first. The company is interested in shale gas, but will have to increase its expertise in the area, possibly through a corporate acquisition or joint venture, Weston said.

-By Mark Peters, Dow Jones Newswires; 212-416-2457; mark.peters@dowjones.com

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