HOUSTON�Entergy Corp., Houston, and Koch Industries Inc., Wichita, Kan., have announced a joint venture to deliver, market, and trade power, natural gas, and other energy-related commodities such as weather derivatives.
With assets totaling around $1 billion, the partners say the new firm, Entergy-Koch LP, will be among the nation�s top 10 energy commodity traders, in terms of combined volumes of electricity and gas traded. Those assets include the 10,000-mile Koch Gateway Pipeline and the Bisteneau, La., gas storage facility.
Through the companies� wholly owned subsidiaries, the venture will trade volumes in excess of 100 million Mw/year of electric power and 5 bcf/d of gas, says J. Wayne Leonard, Entergy�s CEO. Leonard said the complementary strengths of both companies give the new venture �the assets and scale to compete and grow.�
The new firm will be based in Houston. It is the first venture between Koch, a large energy trader, and Entergy, the third-largest US generator of electric power.
Entergy-Koch will benefit from Koch�s market position and experience in energy commodity trading and risk-management services, as well as Entergy�s power-trading interests in the US and Europe and its cash contribution of about $350 million, said Moody's Investor Service, New York. Of that amount, $150 million will be funded with equity and $200 million with debt.
Entergy-Koch will provide customers with a wide range of commodity sources and options, including gas, oil, coal, power, weather derivatives, and other risk-management tools. The joint venture also will market the power and provide risk management and trading for Entergy�s existing and future merchant power plants. Entergy will retain ownership of those assets. It expects the venture to add $0.25-.30/share to its earnings in the venture�s first year of operations.
Entergy-Koch also is expected to expand additional growth opportunities in the weather derivatives market. Koch Energy Trading�s currently accounts for 30% of that market. Koch Senior Vice-Pres. Kyle Vann will head up Entergy-Koch.
Moody's last week affirmed its rating of Entergy's subsidiaries following the joint venture's announcement. Required regulatory approval from the Securities and Exchange Commission and the Federal Energy Regulatory Commission is expected within 6-9 months, say the firms.
