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TECO Energy to acquire New Mexico Gas Co

TECO Energy has entered into a definitive stock purchase agreement with Continental Energy System...

Lou Caruana
TECO Energy to acquire New Mexico Gas Co

The price includes the assumption of $200 million of New Mexico Gas debt, subject to customary closing adjustments.

It will add about 509,000 regulated gas distribution customers, increase the percentage of earnings from regulated operations, and diversify TECO Energy's geographic footprint.

TECO Energy CEO John Ramil said: “This acquisition is a significant step in achieving growth for TECO Energy.

“We are adding 50% to our customer base in a single transaction, and we expect it to provide opportunities for future growth in an attractive Sunbelt location. It will increase the percentage of earnings from regulated operations and reduce earnings volatility.”

Under the terms of the agreement, TECO Energy will acquire NMGI, the owner of New Mexico Gas Co.

The transaction is expected to close in the first quarter of 2014, and is subject to state and federal regulatory approvals. The transaction is expected to be accretive to earnings in the first full year post-closing, 2015.

New Mexico Gas serves approximately 509,000, primarily residential, customers throughout New Mexico. When the transaction is complete, TECO Energy subsidiaries will serve more than 1.5 million regulated electric and gas utility customers in Florida and New Mexico.

“We are experienced in acquiring and integrating regulated gas distribution operations,” Ramil said.

“We acquired Peoples Gas in 1997, and grew that business, in part, by acquiring and integrating other small gas LDC and related businesses such as West Florida Gas and Griffis Gas. Most of the people involved in those activities, at all levels, are part of the team today.”

The transaction provides an opportunity for TECO's management team to share marketing expertise to a new and growing service territory, and for both companies to share best practices to support growth, according to TECO.

New Mexico Gas had EBITDA of $86 million for the 12-month period-ended January 31, 2013.

The transaction is supported by a fully committed bridge financing facility with Morgan Stanley. The permanent financing is expected to be a combination of TECO Energy common equity, cash on hand and long-term debt at NMGC.

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