PG&E; to Manage $2 Billion in Energy Deals for Ultramar

From Times Wire Services

PG&E; Corp. said Tuesday that it has won a contract to manage more than $2 billion in natural gas and electricity contracts for Ultramar Diamond Shamrock Corp. over seven years--an alliance believed to be the largest of its kind in the energy industry.

San Francisco-based PG&E; will seek out the lowest prices for the energy needed to run Ultramar's refining and chemical plants in the U.S. and Canada. It will also build a plant to provide power to a refinery near San Antonio, where Ultramar is based, and find ways to cut Ultramar's energy consumption.

PG&E;, owner of one of the largest U.S. utilities, beat rivals Enron Corp., NGC Corp., Duke Energy Corp., Southern Co. and Coral Energy Resources, a joint venture of Shell Oil Co. and Tejas Gas Corp., for the contract. The agreement is the latest sign that U.S. utilities are transforming themselves from regional monopolies to nimble national competitors.

"This deal is creative. It's the kind of thing competitive companies do," said analyst Robin Diedrich of Edward Jones & Co.

In New York Stock Exchange trading, PG&E; shares rose 56 cents to close at $30.94, and Ultramar Diamond shares rose 19 cents to $35.44.

Ultramar expects to save about $355 million on energy over seven years, said Roger Hemminghaus, Ultramar's chairman and chief executive. In return, PG&E; will receive a cut of the savings.

Negotiations are continuing over what share of the projected $45 million to $75 million in annual savings PG&E; will pocket in the proposed deal.

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