la Frontera In the News

Austin Business Journal

June 17, 2004

TXU Gas Co. sells for $1.9 billion

Dallas-based TXU Corp. announced Thursday that it will sell the operations of TXU Gas Co. for more than $1.9 billion in cash to Dallas-based Atmos Energy Co, according to the Dallas Business Journal.

TXU Gas Co. serves Round Rock, Georgetown, Pflugerville and other communities north of Austin.

The merger with TXU Gas means a major expansion of Atmos' gas distribution business and creates the largest natural gas distribution company in the country. The addition of TXU's almost 1.5 million customers in North Texas will almost double Atmos's size to more than 3.1 million customers. Atmos has operations in 12 states.

Permanent funding for the merger consists of approximately $500 million to $600 million in equity, with the remainder of the purchase price funded with long-term debt.

The deal, which was approved unanimously by Atmos's board of directors, does not require the approval of Atmos Energy shareholders.

The merger is expected to close by the end of the year, subject to review under the federal Hart-Scott-Rodino Act as well as state regulatory approval in Missouri, Virginia and Iowa. The $1.925 billion pricetag approximates the book value of the assets being sold, TXU says.

Profits at TXU Gas, whose rates are regulated by the Texas Railroad Commission, have consistently fallen below investor expectations.

TXU Corp. is a energy company, which manages a portfolio of competitive and regulated energy businesses in North America, mainly in Texas. TXU Corp., the parent of TXU Gas, said in April that it would sell the gas utility by the end of the year as part of its effort to cut debt and focus on its core electricity operation.

TXU Gas, formerly Lone Star Gas Co. , was acquired by TXU Corp. with the 1997 purchase of its parent company, Enserch Corp.

TXU Gas, which was founded in 1909, owns approximately 26,400 miles of distribution pipelines and sells approximately 140 billion cubic feet of natural gas to nearly 1.4 million residential and business customers in approximately 550 cities and towns in Texas.

Atmos Energy Corp. is one of the largest natural gas distributors in the United States, serving about 1.7 million utility customers in more than 1,000 small and medium-size communities in 12 states.

Atmos will retain TXU Gas employees who will become part of the combined company's workforce.