Newspaper article St Louis Post-Dispatch (MO)

Utilities Rush to Merge 2 Latest Deals Add $3 Billion to Trend

Newspaper article St Louis Post-Dispatch (MO)

Utilities Rush to Merge 2 Latest Deals Add $3 Billion to Trend

Article excerpt

Just look at the names: Houston Industries, NorAm Energy, Delmarva Power & Light, Atlantic Energy. It's hard to think of utilities as sexy, particularly when compared with marquee names like Disney, Microsoft, General Electric, IBM.

But power companies are merging at a stunning pace, as fast as any industry. Two deals announced Monday punctuate that trend and show utilities are thinking hard about deregulation and their future.

Electricity provider Houston Industries Inc. announced plans to buy Nor Am Energy Corp., the nation's third-largest natural gas utility, for $2.4 billion. (NorAm also is the parent of Mississippi River Transmission Corp., a pipeline company that is a major supplier to Laclede Gas Co. in St. Louis.)

Delmarva Power & Light Co. will merge with Atlantic Energy Co. in a smaller electric-utility deal valuing Atlantic at about $951 million.

The combinations add to the $19.6 billion in 1996 U.S. utility mergers announced as of Sunday, according to Securities Data Co. That figure already surpasses 1995's $17.9 billion in utility deals.

"Basically, you're seeing a tremendous step-up here because companies are starting to get nervous," said Edward J. Tirello Jr., a utility analyst at NatWest Securities Corp. "At the end of the day, the basic concept is to capture as much of the customer's bill as possible, that's both electric and gas, and at the same time become as big as possible."

The furious desire to combine has even brought some hostile deals to utilities, long seen as plodding companies where profits were largely determined by regulated rates and investors were primarily interested in receiving their dividends.

"Market and regulatory forces are changing the industry landscape to a more competitive environment," Don Jordan, chairman and chief executive of Houston Industries, said in announcing the NorAm acquisition. …

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