Allegheny sells West Virginia gas ops for $228m

Monongahela Power Company, a subsidiary of Pennsylvania-based Allegheny Energy, is to sell its natural gas operations in West Virginia for $141 million in cash and $87 million in assumed long-term debt to a private investment partnership.

The partnership is composed of West Virginia limited liability companies IGS Utilities and IGS Holdings, and affiliates of energy infrastructure investment firm ArcLight Capital Partners in Boston, Massachusetts. The consortium will also settle certain inter-company accounts over a three-year period, estimated at around $16 million.

Allegheny expects to record a loss on the sale of about $40 million ($25 million, net of income taxes) in the third quarter of 2004. The company said it will use proceeds from the deal to reduce debt.

“The sale of our West Virginia natural gas operations is another milestone in our financial recovery plan,” said Paul Evanson, chairman and chief executive of Allegheny. “By selling this business, we can now focus better on our core electric generation and delivery business.”

The sale includes Mountaineer Gas Company, a subsidiary of Monongahela Power, and the West Virginia Power Gas Services assets, both of which do business in West Virginia as Allegheny Power; and Mountaineer Gas Services, a subsidiary of Mountaineer Gas.

The deal comes after ArcLight completed a $1.6 billion private equity fund at the end of June. ArcLight Energy Partners Fund II was oversubscribed and brings the firm's fundraising total to $2.5 billion in two funds over the past three years.