PG&E; to Acquire Valero Energy for $1.5 Billion

PG&E; Corp. said Friday that it will buy San Antonio-based Valero Energy Corp. and its natural gas services business for $1.5 billion in stock and debt.

San Francisco-based PG&E;, parent of Pacific Gas & Electric, said it planned to acquire Valero’s natural gas business, which operates a 7,500-mile pipeline system and eight natural gas processing plants in Texas.

The acquisition would not include Valero’s wholly owned subsidiary, Valero Refining & Marketing Co., which would be spun off before the deal is completed.

Valero Natural Gas Co.’s pipeline system can carry more than 3 billion cubic feet of gas a day. Its operations include transporting and marketing natural gas and natural gas liquids, and the marketing of electric power.

“This acquisition represents another integral component of PG&E; Corp.’s strategic plan to competitively position itself in a rapidly changing energy marketplace,” PG&E; Chairman Stanley Skinner said in a statement.

“The combination of our two companies is a natural fit,” he said. “We share the same vision of the convergence of gas and electric energy markets and the key attributes that the successful energy company of the future must bring to the marketplace.”

The acquisition would mark PG&E;’s third recent investment in the natural gas industry in Texas. In December, PG&E; acquired Energy Source Inc., a Houston-based gas marketing business.

Earlier this week, PG&E; finalized the purchase of Teco Pipeline Co., a Corpus Christi, Texas-based company that operates natural gas gathering, processing, transportation and marketing businesses.

PG&E; said the combination of Valero, Teco and Energy Source would create one of the top 10 gas marketing operations in the United States, with average daily sales volumes of 3.6 billion cubic feet per day in 1996.

The firm said the deal is expected to be completed by mid-1997.