July 31, 2013

Direct Energy to acquire Hess energy marketing unit

Direct Energy, a North American energy retail subsidiary of British utility firm Centrica, has agreed to acquire the energy marketing business of American gas supplier Hess Corporation for a total of $1.03bn.

By admin-demo

Direct Energy, a North American energy retail subsidiary of British utility firm Centrica, has agreed to acquire the energy marketing business of American gas supplier Hess Corporation for a total of $1.03bn.

Besides making a cash payment of about $731m, the fuel retailer will also invest nearly $300m towards net working capital.

Through this acquisition, Direct Energy aims to enhance its positioning in the retail energy industry on the East Coast of the US.

A major B2B energy supplier, Hess’ energy marketing business has presence across 18 Eastern US states with over 23,000 customers.

The business has a line of contracts that include purchase agreements with Marcellus shale gas producers, and gas and power supply agreements with customers, and local distribution companies.

The energy marketing arm has a tolling arrangement in place with Bayonne Energy Centre gas-fired power plant to procure power to its customers in New York.

Centrica chief executive Sam Laidlaw said that the alliance would transform the company’s B2B operations in North America and create a unique dual fuel business in the US.

"It marks a significant step towards delivering on our strategy – substantially increasing the scale of our North American downstream business and integrating along the gas value chain – with the aim of doubling the profitability of our North American downstream business over the next 3-5 years," added Laidlaw.

The acquisition is expected to integrate Direct Energy’s existing capabilities along the gas value chain, linking gas supply from producers and other market participants through secured transport and storage capacity to the gas and power customer base.