Southern Energy Inc., a unit of Southern Company, and Vastar Resources Inc. will combine their natural gas and electricity trading and marketing operations, forming a new full-service energy provider.
The new company, Southern Company Energy Marketing, will be one of just six companies in North America to hold a top 10 position in both natural gas and power marketing, based on first-quarter volumes.
The arrangement is effective Sept. 1, 1997. Southern Company Energy Marketing will be jointly owned by Southern Energy and Vastar Resources. Southern Energy will commit its Atlanta-based energy trading and marketing operations - Southern Energy Trading and Marketing Inc. - to the venture; Vastar will contribute the operations of its Vastar Gas Marketing Inc. and Vastar Power Marketing Inc. subsidiaries. The venture is subject to federal regulatory approvals and signing of final agreements between the two companies.
"This is an opportunity for both Southern Company and Vastar to improve their positions in the energy trading and marketing business," said A.W. Dahlberg, chairman, president and chief executive officer of Southern Company. "From day one, Southern Company Energy Marketing will be a nationwide energy services company, a major player in both the natural gas and electricity markets. This venture is consistent with Southern Company`s plan to be one of the top five energy marketers by the turn of the century."
Southern Company Energy Marketing will provide, where regulation allows, energy trading, marketing and financial services and other energy-related commodities, products and services to customers in North America. These customers include other energy marketers, local gas distribution companies, municipal and cooperative utilities, investor-owned utilities and large business customers.
As the gas and electricity markets continue to converge in North America, Southern Company Energy Marketing is positioned to be a total energy supplier, with customized solutions for each customer`s unique energy needs. For example, Southern Company Energy Marketing can provide low-cost energy commodities to a customer, while also offering value-added services such as energy management services and energy-related risk management services.
The new company will be headquartered in Atlanta. Current plans call for the natural gas operations to be located in Houston, while electricity trading and marketing operations will be in Atlanta.
Marce Fuller, senior vice president of Southern Energy who oversees its North American operations, will serve as chief executive officer of Southern Company Energy Marketing. Andy Lang, currently Vastar Resources` senior vice president of marketing, and Joe Pokalsky, currently a senior vice president with Southern Energy Trading and Marketing, will serve as managing directors of the new entity.
"Vastar Resources is excited about the potential created by a new entity of this magnitude," Lang said. "Vastar`s growing gas volumes and well-established marketing presence, coupled with Southern Company`s power marketing expertise, will allow Southern Company Energy Marketing to offer its customers a level of service and array of products that immediately position this new company as a leading energy marketer. We are pleased to be associated with Southern Company, which is known as one of the most progressive utilities in North America."
Southern Energy will have a 60 percent stake in Southern Company Energy Marketing, with options to increase its ownership over a five-year period. Southern Energy will pay Vastar $40 million Sept. 1. Southern Energy`s ownership automatically increases to 75 percent on July 1, 2001, and Vastar`s stake in the company will decrease from 40 percent to 25 percent.
In connection with the venture, Vastar and Southern Company Energy Marketing expect to enter into a 10-year natural gas purchase and sale agreement. Under the terms of the agreement, Vastar will commit to sell nearly all of its gas production, providing the venture with a gas supply to support its marketing activities.
Southern Company (NYSE: SO), the largest producer of electricity in the United States, is the parent firm of Alabama Power, Georgia Power, Gulf Power, Mississippi Power and Savannah Electric. Based in Atlanta, Southern Company supplies electricity in eight countries on four continents and provides energy-related marketing, trading and technical services and wireless telecommunications. Southern Company`s common stock is one of the 20 most widely held corporate stocks in America.
Vastar Resources Inc. (NYSE: VRI), headquartered in Houston, is one of the nation`s leading independent exploration, production and marketing companies. Atlantic Richfield Co. owns 82 percent of Vastar`s stock. Vastar`s operations are concentrated in four premier producing regions of the United States - the Gulf of Mexico, Gulf Coast, San Juan Basin and Mid-Continent - and its market presence extends nationwide. At year-end 1996, Vastar held more than 2.9 trillion cubic feet equivalent of proved reserves.
Southern Energy`s energy trading and marketing group, one of the top 10 power marketers in the country, sold 6.4 million megawatt-hours of electricity in the first quarter of 1997 and 10.7 million megawatt-hours in the second quarter.
Vastar Gas is one of the nation`s top 10 natural gas marketing companies with first quarter 1997 sales averaging 3.7 billion cubic feet per day and second quarter sales averaging 2.8 billion cubic feet per day.