Dynegy Inc has announced a major expansion of its energy convergence business through the purchase of natural gas storage facilities and related assets in the United Kingdom. The company has agreed to acquire BG Storage Limited (BGSL), a wholly owned subsidiary of BG Group plc. BGSL's UK assets consist of 30 wells with five offshore platforms, nine salt caverns, approximately 19 miles (32 kilometers) of pipelines, and an onshore natural gas processing terminal.
Under the terms of the purchase agreement, Dynegy will pay approximately $590 million for BGSL and its existing assets. The transaction is subject to approvals from The Gas and Electricity Markets Authority and The Department of Trade and Industry, and clearance from the Office of Fair Trading in the UK. It is expected to close during the third quarter of 2001. Following the transaction, BGSL and its 260 employees will become part of Dynegy Europe Limited.
"This acquisition represents a significant expansion of our global presence and advances our long-term strategic plan to replicate our United States energy delivery network in Europe," said Chuck Watson, chairman and chief executive officer of Dynegy Inc. "This purchase also aligns with and advances our energy convergence strategy to expand our portfolio through the acquisition of safe, reliable and affordable assets that enable us to meet the rapidly growing demands of the wholesale energy market in the United States and Europe."
Two of the facilities included in the transaction, Rough and Hornsea, 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. Rough, an offshore depleted natural gas field, has a deliverability rate of 1.5 billion cubic feet (Bcf) per day (455 gigawatt hours per day). The deliverability rate of Hornsea, an onshore salt cavity installation, is 620 million cubic feet (MMcf) per day (195 GWh/day). The two facilities are capable of storing 111 Bcf of natural gas.
As part of the purchase agreement, Dynegy also will acquire the Easington natural gas processing terminal. This 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 six Bcf and deliverability rate of 600 MMcf/day (185 GWh/day).
"he acquisition is the cornerstone of Dynegy's European energy delivery network, which will enable us to capture incremental value in the newly liberalised European Union energy markets," said Gary Cardone, president of Dynegy Europe Limited. "This acquisition is a part of Dynegy's broader business strategy to replicate across Europe our successful North American energy convergence strategy, based on competitive deregulated energy markets. Dynegy intends to create more flexible and innovative products to meet the special requirements of its customers across the energy value chain. It is our expectation that Dynegy's innovative approach to meeting customers' needs, as already demonstrated in other energy markets, will substantially increase the number of parties using these storage facilities within a year."