ALBUQUERQUE, N.M. — 509,000 customers would get new supplier in pending deal
More than half a million New Mexico customers could have a new natural gas supplier as early as next year.New Mexico Gas Co. has agreed to be acquired by Florida-based TECO Energy Inc. in a stock-purchase and debt-assumption deal valued at $950 million.
The agreement, announced Tuesday, is subject to federal and state regulatory approvals, but TECO executives said they hope to close on the acquisition by early 2014.New Mexico Gas Co. serves 509,000 customers residing in 23 of the state’s 33 counties. It operates about 1,600 miles of transmission pipeline, and 10,000 miles of distribution lines.TECO is a publicly traded holding company with $2.38 billion in revenue in 2012. It currently provides electricity and natural gas to about 1 million customers in Florida through its electric and natural gas subsidiaries, Tampa Electric and Peoples Gas System.It wants to acquire New Mexico Gas Co. as part of an effort to grow its business throughout the Sunbelt states of the U.S. South and Southwest, where the company sees more dynamic expansion opportunities than in other regions, TECO President and CEO John Ramil
“The utility industry is consolidating, and we see this as an opportunity to grow along with that consolidation,” Ramil said. “We’re looking to bring companies that are well run and located in growing areas into the TECO family, and we think New Mexico Gas strongly meets both of those criteria.”
For New Mexico Gas Co., the acquisition could add financial muscle to build and grow its operations, said president Annette Gardiner.
“With new investments in the system and with TECO’s expertise, we can take advantage of more opportunities,” Gardiner said.
Members of the state Public Regulation Commission said they will look closely at the acquisition’s impact on consumers, and on New Mexico Gas’ 740 employees.
“We don’t have details of the sale yet, but we’ll review the plan carefully to make sure customers are protected,” said Commissioner Valerie Espinoza. “We want to make sure they provide reliable and affordable service and that they put people before profits. They do seem to have a solid reputation, and it seems their intentions are to expand and install new infrastructure and invest in the state.”
Apart from the PRC, the Federal Trade Commission and the U.S. Justice Department must also review the merger under federal antitrust law.
TECO executives are expected to arrive Wednesday in Santa Fe, where they will meet with some, if not all PRC commissioners.
Chairman Ben Hall said he will look closely at TECO’s financial standing and ability to run local gas operations efficiently, given that the acquisition would increase TECO’s customer base by 50 percent to about 1.5 million consumers.
“That’s a pretty big jump, so we want to make sure they can handle all that,” Hall said.Post-acquisition stability and operational efficiency are likely to be prominent themes when reviewing the deal.New Mexico Gas, a subsidiary of Continental Energy Systems LLC, acquired the gas utility from PNM Resources in 2009 for $620 million. But Continental, a utility holding company backed by the private equity firm Lindsay Goldberg, will have divested itself of all its subsidiaries once the TECO deal closes. Apart from New Mexico Gas, Continental owned Michigan-based Semco Holding with gas operations in Michigan and Alaska, but it sold Semco to AltaGas for about $1.1 billion in 2012.
New Mexico Gas faced a public backlash and regulatory scrutiny of its operations after a severe cold spell in 2011 disrupted the utility’s supply system, forcing it to temporarily cut off gas to about 28,000 customers.
Ramil said TECO has the broad experience and financial means needed to operate and grow the utility in New Mexico. The company, which also owns coal mine operations in Kentucky and Virginia, has been expanding its gas business in Florida through acquisitions of smaller companies in recent years, such as West Florida Gas and Griffis Gas. It’s particularly interested in acquiring regulated utilities like New Mexico Gas, which can help reduce earnings volatility for the company.In a regulated system, the gas company earns its income from the management and distribution services it provides customers. It simply bills customers the actual cost of the natural gas they consume, and the PRC sets base rates for the utility’s delivery services, allowing it to earn a return.”We bring 100-plus years of experience to the table in the electric and gas utility business,” Ramil . “We’ve learned a lot and we believe we’re good operators.”