UPDATE:Centrica North America Unit Shops For Gas, Power Assets
March 30 2010 - 4:47PM
Dow Jones News
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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