Macquarie buys Constellation’s downstream gas business

Macquarie Group has announced that it is buying Constellation Energy's Houston-based downstream natural gas trading operations for an undisclosed fee.

The Constellation operations will be combined with Macquarie's existing North American gas trading business, Macquarie Cook Energy.

Constellation Energy's downstream natural gas trading unit is one of the largest marketers of natural gas in North America, according to a Macquarie statement. The business averages over 10 billion cubic feet (bcf) per day and has approximately 130 employees.

Headquartered in Houston and with operations in Calgary and Baltimore, Constellation's natural gas unit provides physical natural gas to meet fuel supply needs of customers, including local distribution companies, power generators, retail aggregators, industrials and large end-users in the US and Canada.

Macquarie Cook Energy was established in 2005 following the acquisition of Los Angeles-based Cook Inlet Energy Supply and has offices in Los Angeles and Denver. Macquarie Cook Energy averages circa 3 bcf per day and has approximately 80 employees. The majority of Macquarie Cook Energy's operations will be relocated to Houston, and the integrated business will continue to be led by Nicholas O'Kane, global head of Macquarie's energy markets division.

"This transaction is a logical addition in the evolution of Macquarie's North American gas trading business and will form an integral part of our larger energy markets platform, which we have grown in key global markets since 2002," said Andrew Downe, global head of Macquarie's treasury and commodities group, in a statement.

In a related transaction, Macquarie Cook Energy and Constellation Energy agreed that Macquarie Cook Energy will supply natural gas to Constellation's Louisville-based retail gas division, Constellation NewEnergy Gas.

The sale of the downstream business is the latest move by Constellation in a bid to reduce risk in its merchant businesses and improve liquidity. On 20 January 2009, the company announced the sale of its London-based international commodities unit to an affiliate of Goldman Sachs. This transaction is expected to close by the end of the first quarter of 2009.

Concerns over Constellation's exposure to liquidity risk last year led it to agree to a merger with Warren Buffett's MidAmerican Energy in September 2008. This deal was rejected in December 2008 for a $4.5bn deal with French firm EDF that included a 49.99% stake in Constellation's nuclear generation and operation business.