Dynegy Acquires UK Gas Storage Assets
Dynegy Inc. has completed the acquisition of BG Storage Limited (BGSL) and its natural gas storage facilities and related assets in the United Kingdom. The transaction has been approved by The Gas and Electricity Markets Authority and The Department of Trade and Industry and has been cleared by the Competition Minister following advice from the Director General of Fair Trading in the UK. Dynegy Europe Limited and BG Group plc originally announced the signing of a definite agreement with respect to the transaction on July 16, 2001.
The acquisition of BGSL's 30 wells with five offshore platforms, nine salt caverns, approximately 19 miles of pipelines and an onshore natural gas processing terminal establishes the cornerstone of Dynegy's European physical energy convergence presence. BGSL's 260 employees will remain employed under its new name of Dynegy Storage Limited.
"This acquisition strengthens our competitive position in the UK and is a significant step toward our long-term goal to replicate our North American energy delivery network throughout Europe," said Chuck Watson, chairman and chief executive officer of Dynegy Inc. "When combined with our marketing, risk management and logistics capabilities in the UK, these assets will support the creation of even greater value for our customers and our shareholders."
Rough and Hornsea, two of the facilities included in the transaction, are key providers of physical storage space in the UK natural gas market and are used by approximately half of the UK's natural gas shippers. The deliverability rate of Rough, an offshore depleted natural gas field, is 1.5 billion cubic feet per day (455 GWh/day). The deliverability rate of Hornsea, an onshore salt cavity installation, is 620 million cubic feet per day (195 GWh/day). The two facilities are capable of storing 111 billion cubic feet (Bcf) of natural gas.
As part of this transaction, Dynegy also acquired the Easington natural gas processing terminal. The facility processes Rough and third-party natural gas streams and delivers into the UK natural gas transportation network. BGSL previously announced plans to develop the Aldbrough storage facility, a salt cavern with an expected storage capability of 6 Bcf and deliverability rate of 600 MMcf/day (185 GWh/day). Dynegy Europe will examine the feasibility of Aldbrough's development plans in the future.
Dynegy Europe has already consulted with existing and potential customers on enhancements and additions to the storage services. "We are committed to providing flexible and innovative products to meet the special requirements of our new and existing storage customers," said Gary Cardone, president of Dynegy Europe. "We are also committed to working with our customers and incorporating their insight on essential storage needs into our comprehensive product development portfolio."
Under the terms of the purchase agreement, Dynegy paid approximately $600 million (421 million pounds) for BGSL and its assets. Dynegy used a combination of cash on hand and short-term borrowings to complete the purchase. The ownership of BGSL is expected to be accretive to earnings in 2002 and beyond.