KeySpan and Enron Announce Gas Supply Management Agreement

Strategic Insights -

KeySpan Energy Corporation, the parent holding company of the nation's fifth-largest gas distribution company, Brooklyn Union Gas, has entered into an agreement with Enron Capital & Trade Resources Corp. (ECT), a subsidiary of Enron Corp., to provide gas supply management services for Brooklyn Union Gas. Under the terms of the agreement, ECT will manage Brooklyn Union's interstate pipeline transportation, gas supply, and storage, ensuring that its gas supply requirements are met while guaranteeing a premium over savings and profits for the company's customers and shareholders.

Key Takeaways:

  • The agreement is the largest natural gas distribution asset management transaction to date, with ECT assuming complete control of Brooklyn Union's natural gas portfolio.
  • Brooklyn Union has led the field of independent gas supply managers, achieving over $10 million annually in combined savings and profits from its New York hub's off-system sales in 17 states.
  • The partnership will enable ECT to capture additional value in Brooklyn Union's natural gas supply portfolio, bringing benefits to the utility and its customers.
  • The guaranteed profits and savings for Brooklyn Union will serve as a model for other utilities throughout the country, accelerating the trend of gas distribution companies outsourcing their gas supply function in preparation for full retail competition.
  • KeySpan Energy Corporation plans to combine with the Long Island Lighting Company, awaiting final approval from regulatory authorities.
  • Enron Corporation is the world's leading integrated natural gas and electricity company, with approximately $23 billion in energy-related assets.

Statistics:

  • Brooklyn Union purchases natural gas in excess of 140 billion cubic feet per year at an annual cost of approximately $500 million.
  • The combined savings and profits achieved by Brooklyn Union in the last three years exceed $10 million annually.
  • Enron Corporation owns approximately $23 billion in energy-related assets.

Sources:

  • KeySpan Energy Corporation's website: www.keyspanenergy.com
  • Brooklyn Union's website: www.bug.com
  • Enron Corporation's website: www.enron.com
  • Enron's stock ticker symbol: "ENE"
  • The Houston Exploration Company (NYSE: THX)