By the OGJ Online Staff
HOUSTON, Jan. 4, 2002 – Dynegy Inc., Houston, settled one lawsuit with subsidiaries of Houston-based Enron Corp. and will exercise its option to acquire Northern Natural Gas Pipeline by the end of this month, officials said late Thursday night.
Dynegy’s exercise of that option requires payment of $23 million at closing, subject to working capital adjustments. In return, Dynegy agreed to extend Enron’s option to repurchase the pipeline to June 30 from a previous deadline of May 9.
Meanwhile, Enron will provide transition services for safe and reliable operation of the pipeline system through June, while Dynegy assumes control of the system.
“We acquired the pipeline under the terms originally agreed upon by the two companies with the exception of the date extension,” said Chuck Watson, Dynegy’s chairman and CEO.
The settlement does not affect any other rights of either Dynegy or Enron in connection with their now terminated merger agreement, said officials of each company.
Enron continues a separate lawsuit seeking $10 billion in damages from Dynegy for the termination of the merger agreement. Company officials said they would add a claim for additional damages to that original complaint, alleging Dynegy’s exercise of its option to acquire Northern Natural Gas Pipeline “was wrongful.”
Dynegy executives said they intend to pursue their earlier countersuit against Enron for alleged breaches of that agreement.
Dynegy earlier paid $1.5 billion to acquire preferred stock and other rights in an Enron subsidiary that owns the pipeline. Following the termination of that merger agreement, Dynegy exercised its rights to acquire the common equity of the pipeline’s parent.
Northern Natural Gas Pipeline provides natural gas transportation and storage services to its customers along with cross-haul and grid transportation between other interstate and intrastate pipelines in the Permian, Anadarko, Hugoton, and Midwest areas.
Its 16,600 miles of pipeline extend from the Permian basin in West Texas to the upper Midwest US with service to major utilities and industrial customers. It has a market area capacity of some 4.3 bcfd and storage capacity totaling 590 bcf of gas.
“Through our longstanding relationship with Northern Natural Gas, we recognize the value of its operations and the professional manner in which its employees serve their customers. We will be committed to maintaining the same high level of service and safe asset operation that has characterized Northern Natural Gas’ management of its business,” said Watson.
“This action ensures continuity of quality service to the customers of Northern Natural Gas and stability for the outstanding employees who have run the pipeline carefully and safely for many years,” said Stan Horton, chairman and CEO of Enron Transportation Services Co.
“We remain committed to our tradition of excellence throughout this transition period,” he said.