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Direct Energy Business to buy Energy Marketing for $1bn

Staff writer ▼ | August 1, 2013
Centrica's North American subsidiary Direct Energy Business will acquire Energy Marketing business of Hess Corporation for $731 million in cash plus net working capital, estimated at approximately $300 million.
Direct Energy Business
Direct Energy BusinessCentrica's North American subsidiary Direct Energy Business will acquire Energy Marketing business of Hess Corporation for $731 million in cash plus net working capital, estimated at approximately $300 million.


The Energy Marketing business is one of the largest B2B energy suppliers in the Eastern US, operating in 18 states. In 2012, the Energy Marketing business supplied 378 billion cubic feet (bcf) of gas and 28 terawatt hours (TWh) of power to over 23,000 customers.

When combined with Direct Energy's existing business, which in 2012 supplied 77bcf of gas and 51TWh of power, the acquisition will make Direct Energy the largest business gas supplier on the East Coast of the US and the second largest business power supplier in the competitive US retail markets.

The business has an extensive portfolio of existing gas and power contracts. These include purchase agreements with Marcellus shale gas producers, gas storage and pipeline capacity, and gas and power supply agreements with customers, including local distribution companies. It also has a tolling arrangement on the Bayonne Energy Centre gas-fired power plant, to supply power to its customers in New York.

Hess' Energy Marketing business had revenues of over $6 billion in 2012 and is expected to deliver around $200 million of EBITDA in 2013, with margins similar to those of Direct Energy's existing B2B activities. The acquisition is expected to be earnings accretive in its first full year, after the effect of fair value accounting, and in addition is expected to deliver operational efficiencies.


 

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