Pepco buys gas firm Gaslantic will help acquirer prepare for energy deregulation


September 16, 1998|By Kristine Henry | Kristine Henry,SUN STAFF

With an eye toward coming energy deregulation, the Potomac Electric Power Co. has purchased a Maryland natural gas company.

Pepco Services Inc., a wholly owned subsidiary that provides electricity to nonresidential customers, said yesterday that it bought Gaslantic Corp., a natural gas retail marketing and advisory services company in Forest Hill that had revenue of $50 million last year. The purchase price was not disclosed.

"We are entering an era of competition in which we will presumably not have 100 percent of the electricity market any more in our region, so then we have to look for other income-producing activities and this is an example of that," said Pepco spokeswoman Nancy Moses.

A proposal now before the General Assembly would require all Maryland electricity customers to have a choice of suppliers by 2002, a benchmark that would be phased in over three years.

Pepco, which had $1.8 billion in revenue last year, had planned to merge with Baltimore Gas and Electric Co. But the $3 billion merger was called off in December, after two years of planning. The companies said regulatory constraints would have limited profits.

While the deal with Gaslantic is of a significantly smaller scale, it does help Pepco expand its reach and diversify its interests.

`We have actively pursued new business opportunities and alliances that are compatible with our central utility business," said Pepco's chief financial officer, Dennis Wraase. "Now, through our energy services subsidiary, Pepco is able to sell natural gas to our electric customers."

John R. Cory Sr., president and founder of Gaslantic, will be retained to run what will be known as Pepco's Gaslantic division.

"When I learned they [Pepco] were looking for a natural gas company, I had one and they had some of what I need for my clients -- a greater presence in electric power services and the capital to help construct the energy projects our clients need," Cory said. "It seemed to be a good match, and we worked on it real hard for six months, and, lo and behold, it happened."

Gaslantic has 18 employees, Cory said, all of whom will be retained.

Ronald S. Tanner, an analyst with Legg Mason Wood Walker in Baltimore, said the purchase made sense for Pepco.

"It's certainly diversification into an area that a lot of utilities are getting into," he said. "I'm sure, strategically, it will be something that they expect to get earnings growth out of."

Pub Date: 9/16/98

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