El Paso Energy to Buy PG&E; Natural-Gas Unit
PG&E; Corp. said Monday that it will sell its Texas natural-gas business to El Paso Energy Corp. for $840 million and take a charge of $890 million against fourth-quarter earnings because it will lose money on the sale.
San Francisco-based PG&E;, owner of California’s largest utility, said in December that it was willing to take a loss to get rid of the pipelines. The company lost 18 cents a share on those operations in 1998, PG&E; spokesman Greg Pruett said.
El Paso, a natural-gas pipeline company that has extensive Texas holdings, said it wants the business to help it supply the increasing number of gas-fired power plants in the U.S.
The Houston-based company has announced acquisitions in the last month that would bring its pipeline network to 66,500 miles, the largest in the U.S.
In New York Stock Exchange trading, PG&E; rose 81 cents to close at $21.94 and El Paso advanced $1 to close at $32.25.
“El Paso is getting pipelines and processing plants at the right price that it can assimilate into its own operations in Texas,” said Donato Eassey, a Merrill Lynch & Co. analyst who rates El Paso’s shares “near-term buy.”
For $279 million in cash and the assumption of $561 million in debt, El Paso would acquire 8,500 miles of interstate gas pipelines, nine processing plants, three fractionation plants, a gas storage field and 585 miles of additional pipelines that carry fuels removed from gas such as butane and propane.
The announcement comes three months after El Paso agreed to buy Sonat Inc. for $6.6 billion and two weeks after it agreed to buy Coastal Corp. for $16 billion.
El Paso is expanding its pipeline network as tighter clean-air laws and a move to deregulation increase the use of natural gas for electricity generation. Natural gas burns cleaner than other fossil fuels, and plants using gas are cheaper and quicker to build than other types.
PG&E; said the planned charge amounts to $2.42 a share. The company is expected to earn 46 cents in the fourth quarter before charges or gains, the average estimate of analysts surveyed by First Call/Thomson Financial.
