British utility Centrica to buy US gas supplier Energy Marketing for $731 mn

British multi-national utility Centrica Plc today said that it will acquire Energy Marketing business of Hess Corporation, for $731 million (£478 million) in order to expand in North America.

Centrica's North American subsidiary, Direct Energy Business, will acquire the New Jersey-based Direct Energy Business for $731 million in cash plus net working capital, estimated at approximately $300 million.

The Energy Marketing business is one of the largest B2B energy suppliers in the Eastern US, operating in 18 states. 

In 2012, the Energy Marketing business supplied 378 billion cubic feet (bcf) of gas and 28 terawatt hours (TWh) of power to over 23,000 customers.

When combined with Direct Energy's existing business, which in 2012 supplied 77bcf of gas and 51TWh of power, the acquisition will make Direct Energy the largest business gas supplier on the East Coast of the US and the second largest business power supplier in the competitive US retail markets.

The business has an extensive portfolio of existing gas and power contracts, including purchase agreements with Marcellus shale gas producers, gas storage and pipeline capacity, and gas and power supply agreements with customers, including local distribution companies.

In addition it has a tolling arrangement on the Bayonne Energy Centre gas-fired power plant, to supply power to its customers in New York.

Hess' Energy Marketing business had revenues of over $6 billion in 2012 and is expected to deliver around $200 million of EBITDA in 2013.

''This transaction will transform our B2B operations in North America, giving us leading positions in business gas and power supply and creating a unique dual fuel business in the US, said Sam Laidlaw, Centrica's CEO.

''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,'' he added.

Based in Windsor, Centrica is the largest supplier of gas to domestic customers in the UK.