Direct Energy unit to acquire competitor from Hess for $1.03B
Competitive energy supplier Direct Energy Business LLC continued its expansion on Tuesday with a deal to buy a competing business-focused energy marketing unit from Hess Corp. for $1.03 billion.
Since entering the Pittsburgh market in 2008, Downtown-based Direct Energy has doubled employment to 400 by selling electricity and natural gas to residential and business customers in 12 states.
Its acquisition of Hess' operation in Woodbridge, N.J., will add six states and 23,000 business customers. That will make Direct Energy, a subsidiary of Centrica plc of London, one of the largest business-to-business energy suppliers in the eastern United States, with annual revenue of $10 billion.
“This transaction will transform our B2B operations, giving us leading positions in business gas and power supply and creating a unique dual-fuel business,” said Badar Khan, CEO of Houston-based parent Direct Energy LLC. Its goal is to double profitability in North America over three to five years.
Direct Energy is strong in electricity supply and Hess is strong in natural gas, and bringing them together combines their strengths, Kahn said.
The Direct Energy Business unit, with about 400 employees at Liberty Center, serves commercial and industrial customers and is one of four units operated by Direct Energy. It operates residential and supply and trading units in Houston and a utility services unit based in Florida, employing 6,000 nationwide.
Direct Energy entered Pittsburgh by acquiring Strategic Energy LLC. Its customers have included Heinz Field, Duquesne University, PNC Park and the David L. Lawrence Convention Center.
The impact on Pittsburgh is yet to be determined, Kahn said. Hess' unit employs about 360 in Woodbridge, and executives haven't made decisions on integrating the units, he said.
The sale is expected to close in the fourth quarter, if regulators approve.
“We are as committed to Pittsburgh as we always have been,” Kahn said. “We do expect to operate the business from Pittsburgh, where we have a lot of talented people, and New Jersey, as well as Houston. We don't expect that to change.”
Direct Energy Business operates in 12 states with annual revenue of $4 billion. Hess' unit operates in 18 states with $6 billion in annual revenue.
In 2012, Direct Energy Business supplied about twice as much electricity to customers as Hess, 51 terawatt hours versus 28 TWh. Hess supplied about four times as much natural gas as Direct Energy, 378 billion cubic feet versus 77 bcf.
Competitive energy suppliers such as Direct Energy purchase natural gas and electricity under contract from producers and wholesale markets and link supply through transport and storage capacity to customers through local distribution companies.
New York-based Hess plans to focus on exploration and production activities and withdraw from downstream operations. This transaction brings its year-to-date asset sales to $4.5 billion.
John D. Oravecz is a Trib Total Media staff writer. He can be reached at 412-320-7882 or firstname.lastname@example.org.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- McDonald’s localizes menus to battle growing competition
- Consider these factors before opting for longer-term auto loan
- Longer, roomier, ritzier Sedona upgrades minivan to 1st-class
- Aetna to buy rival Humana for $35B
- Airlines offer small conveniences to counter higher fees, less space
- National Day Calendar lends legitimacy to pseudo-holidays
- Air control stickiness a real puzzler
- Halliburton to close Indiana County office
- $10B Heinz bond sale to finance Kraft takeover