Allegheny unit to buy consultant, provider

$29.6 million deal to aid diversification, expand distribution

May 31, 2001|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

An unregulated business development arm of Hagerstown-based Allegheny Energy Inc. said yesterday that it has agreed to buy a natural gas and electricity consulting and management firm and a natural gas supply and transportation services provider for $29.6 million cash.

Allegheny Ventures' purchase of consultant Fellon-McCord & Associates Inc., and its affiliate, Alliance Energy Services Partnership, both of which are based in Kentucky, is expected to be completed in the third quarter of this year.

The acquisition will help advance Allegheny's strategy to expand its regional distribution business, Allegheny Energy Solutions, and help further diversify the company's businesses.

"If you're not a one-trick pony, you can continue to surprise the market," said industry analyst Craig K. Shere at Standard & Poor's. "I don't think that this will have a humongous impact, but Allegheny has a history of building successful unregulated subsidiaries.

"The move to beef up their presence in the distributed energy space, which these acquisitions pertain to, is very intelligent, given concerns about their liability and cost of power off the public electric grid.

"Industrial demand for reliable power in the back yard is on the rise."

Fellon-McCord serves more than 300 customers across the country, working in the commercial, industrial, municipal and utility marketplaces. Alliance, which is owned by Fellon-McCord and Conoco Inc., markets natural gas and provides customer-management services to more than 800 commercial and industrial users across the country.

As part of the transaction, Allegheny Energy Solutions will establish a long-term relationship with Conoco, which will provide natural gas and wholesale marketing services to Alliance.

"Adding gas procurement and management services to our current offerings will create tremendous opportunities for growth by giving us the capability to provide comprehensive distributed energy solutions to customers in new markets throughout the country," Ron E. Cardwell, vice president of Allegheny Energy Solutions, said in a prepared statement.

Allegheny Energy Solutions currently offers design, construction, operation and financing of distributed generation, co-generation, power quality and reliability services.

The transaction awaits customary regulatory approvals, including those of the Securities and Exchange Commission and the Federal Trade Commission.

Shares of Allegheny fell 42 cents to $52.43 yesterday.

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