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News ReleaseJan. 14, 2008
PNM Utility To Sell Natural Gas Business Albuquerque: PNM Resources' New Mexico utility, PNM, has agreed to sell its natural gas operations in a strategic move to concentrate the company's efforts on electric operations during an era of rising costs, growing demand for electricity and significant capital investments. The gas business will be purchased by a subsidiary of Continental Energy Systems, a utility holding company whose current natural gas businesses serve approximately 410,000 customers in Michigan and Alaska. The sale, in which approximately 800 employees will transfer to the new owner, is part of an ongoing strategic effort by PNM Resources to strengthen its financial position and focus its investment strategy in advance of an expected $1.7 billion investment by PNM in its New Mexico electric system in the next five years. This amount is more than double what it spent in the past five years. Other parts of the ongoing strategic effort – including PNM's pending electric rate case as well as its ongoing efforts to increase efficiency and reduce future costs – are unaffected by the sale and remain top company priorities. "While this sale represents a significant change for our company, a successful outcome in our current electric rate case is critical," said Jeff Sterba, PNM Resources chairman, president and CEO, referring to PNM's first requested electric rate increase in 20 years. "Our New Mexico electric business must be able to recover its costs of providing service so we can continue to invest in providing quality service to a growing state." PNM will focus on electricity, new owner has strong N.M. ties In much of its 90-year history, PNM has been an electric company. It entered the gas business most recently in 1985 as a result of an anti-trust price fixing lawsuit against the gas company's prior owner, Southern Union. PNM agreed at the time to purchase the gas company and work to restore health to its operations. "We have worked hard to provide great service to our gas customers since we acquired the gas company and are proud of the results accomplished by our gas employees," Sterba said. "We are pleased to have found a quality, experienced natural gas delivery company to buy our New Mexico gas operations. They'll have the opportunity to serve New Mexico with the same employees who serve them now." George A. Schreiber, Jr., president and CEO of Continental Energy Systems, said, "We look forward to becoming an important member of the New Mexico business community. As we have done in our Michigan and Alaska markets, we are committed to high-value and reliable customer service. A critical component of these operations is the emphasis we put on making sure our employees work safely and will likewise be an important ingredient of our New Mexico business." Schreiber continued, "The new company will be named New Mexico Gas Company and will be locally managed and headquartered in New Mexico. This is the same approach we have utilized in our other natural gas distribution businesses, SEMCO Energy Gas Company in Michigan and ENSTAR Natural Gas Company in Alaska." "New Mexico's strong economic potential, the markets served by PNM's gas assets and its skilled work force make this an attractive investment opportunity," Schreiber said. "We expect all PNM gas employees, along with those needed to support it administratively, will transfer to the new company after regulatory approval is received and the transaction closes." Schreiber is very familiar with New Mexico. He grew up in Albuquerque, graduated from Highland High School and attended the University of New Mexico before getting his MBA from Arizona State University. He maintains strong ties to the state. His father also was chairman and CEO of PNM for 10 years, starting in 1966. The proposed sale will be reviewed by New Mexico state regulators, is subject to Hart-Scott-Rodino anti-trust review, and is expected to close toward the end of this year. In the meantime, Sterba said, PNM is committed to maintaining safe and reliable service to its nearly 500,000 natural gas customers. In a separate and smaller transaction, PNM Resources has agreed to purchase from Continental Cap Rock Holding and its subsidiary, Cap Rock Energy Corporation, which is a regulated Texas electric business. Cap Rock Energy serves approximately 36,000 customers in 28 counties in north, central and west Texas. This transaction will be reviewed by the Public Utility Commission of Texas, the Federal Energy Regulatory Commission, and is also subject to Hart-Scott-Rodino anti-trust review. Sterba said the purchase of Cap Rock Energy will increase the company's presence in Texas and is consistent with its strategy of focusing on electric operations. The net proceeds resulting from these transactions will be used to retire debt, fund future electric capital expenditures and for other corporate purposes. Additional information about the transaction is available at PNM.com. Customers with questions can call 1-888-DIAL PNM (888-342-5766). About PNM Resources About Continental Energy Systems Safe Harbor Statement under the Private Securities Litigation Reform Act of
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