Acquisition is Latest Strategic Step in Expanding PP&L Resources' Growing Portfolio of Energy Products and Services
ALLENTOWN, Pa.---PP&L Resources, Inc. (NYSE: PPL) achieved another milestone in its ongoing strategy to offer expanded services and be a leader in the new energy marketplace when it finalized the acquisition of Penn Fuel Gas, Inc., today (8/21).
Penn Fuel Gas, with headquarters in Oxford, Pa., distributes and stores natural gas and also sells propane. The company has 100,000 customers in Pennsylvania and in a small area of Maryland.
"The addition of Penn Fuel Gas to the family of PP&L Resources' companies expands our ability to provide customers with energy choices at highly competitive prices," said William F. Hecht, chairman, president and chief executive officer of PP&L Resources. "Penn Fuel Gas's retail gas operations complement PP&L, Inc.'s expanding gas trading function. This is just one more way PP&L Resources, through its various subsidiary operations, is offering a range of services to meet customers' needs in the new energy marketplace.
"Through the acquisition of Penn Fuel Gas, we'll have the transportation services to supply gas. Expanding into the natural gas business with a quality operation like Penn Fuel Gas is a tremendous opportunity," said Hecht.
"Penn Fuel Gas's customers, employees, shareowners and communities will be well served through this merger," said Terry H. Hunt, president and chief executive officer of Penn Fuel Gas. "Like Penn Fuel Gas, PP&L Resources has a proven record of providing high- quality, competitively priced service to customers. We look forward to doing our part to help PP&L Resources and its various affiliates grow and prosper."
PP&L Resources' Ongoing Strategy
The closing of the Penn Fuel Gas acquisition is only the latest step in PP&L Resources' efforts to expand its portfolio of energy products and services. Over the past several years, PP&L Resources has taken significant steps to capitalize on the many opportunities presented by the rapidly evolving energy business.
"While PP&L, Inc., our electric utility subsidiary, continues to generate and deliver electricity to 1.2 million customers in central and eastern Pennsylvania, we have moved far beyond that traditional business," said Hecht.
For example, PP&L, Inc.'s state-of-the-art Energy Marketing Center trades or markets energy — both electricity and gas — in 26 states and Canada, maximizing the value of PP&L, Inc.'s generation assets. Under a wholesale contract recently signed with the city of Easton, Md., PP&L, Inc., supplies wholesale power to the town, while also managing the town's electric generating assets. In addition, the center's gas trading group recently began providing gas supply to customers, including a consortium of hospitals and other industrial customers outside the company's traditional service area.
The company's retail marketing function, PP&L EnergyPlus, sells competitively priced electricity and gas to retail customers throughout Pennsylvania. PP&L EnergyPlus also provides energy products and services including energy information services, energy project design and development and facility management services to commercial and industrial customers.
Internationally, PP&L Global, Inc., has made $635 million in investments and commitments to date. Most recently PP&L Global announced that it had doubled its ownership stake in South Western Electricity, plc (SWEB), the regional electricity company based in Bristol, England. PP&L Global now owns 51 percent of the equity interest and 49 percent of the voting interest in SWEB.
PP&L Global has invested in companies in the United Kingdom, Chile, El Salvador, Peru, Argentina and Brazil, which together serve about 3 million electric distribution customers. In addition, PP&L Global owns interests in electric generation facilities in Spain, Portugal, Bolivia and Peru.
Domestically, PP&L Global is negotiating development of a merchant power generation plant on the site of the Alfred L. Pierce Station, owned by Wallingford, Conn., and also is exploring merchant plant opportunities in other states as well.
Through its PP&L Spectrum, Inc., subsidiary and two HVAC subsidiaries, H. T. Lyons, Inc., and McClure Co., PP&L Resources has expanded its ability to offer a variety of new energy products and services tailored to individual customer needs. In addition, these subsidiaries offer the more traditional energy management, heating, ventilating and air-conditioning services to large commercial and industrial customers throughout Pennsylvania and neighboring states.
By combining the expertise of Spectrum, Lyons and McClure, PP&L Resources can provide integrated energy services to its large customers. For example, through arrangements with the School District of Lancaster and the city of Bethlehem, Pa., PP&L Spectrum is installing energy-efficient improvements and providing money-saving energy management services. This is the kind of value-added service PP&L Spectrum offers customers throughout Pennsylvania and beyond, commented Hecht.
"The energy industry has fundamentally changed over the past several years," said Hecht, "and PP&L Resources is meeting the challenges brought about by those changes. The steps we have taken at PP&L Resources will solidify the company's position as one of the East Coast's predominant energy companies."
Penn Fuel Gas Acquisition
Under the terms of the merger agreement, shareowners of Penn Fuel Gas will receive 6.968 common shares of PP&L Resources for each common share of Penn Fuel Gas that they own. PP&L Resources issued about $133 million of common stock to close the merger. Hecht said that Penn Fuel Gas will retain its name and operate as a wholly owned subsidiary of PP&L Resources. Penn Fuel Gas will join PP&L, Inc.; PP&L Global; PP&L Spectrum; H. T. Lyons; and McClure Co. as first-tier subsidiaries of PP&L Resources.
Hunt will remain president and chief executive officer of Penn Fuel Gas and will continue to run the operation from its Oxford, Pa., headquarters.
Penn Fuel Gas has about 500 employees. Its year-end 1997 total revenues were $119 million.
Penn Fuel Gas owns and operates PFG Gas, Inc., and North Penn Gas Co., both natural gas distribution companies. Penn Fuel Gas also operates a propane business and North Penn Gas owns natural gas storage facilities. Penn Fuel Gas and its two subsidiaries provide natural gas service to customers in more than half the counties in Pennsylvania, in an area stretching from northern Maryland to northern Pennsylvania.