TAMPA TECO Energy Inc. announced plans today to acquire New Mexico Gas Co. for about $950 million, significantly expanding the Tampa-based company’s customer base.
The deal would add about 509,000 customers to TECO’s gas distribution operations. New Mexico Gas, with about 740 employees, serves about 60 percent of the state’s population, mostly in the state’s Central Rio Grande Corridor region.
“For us to do a good job for our customers, we need to be a healthy organization,” said John Ramil, TECO president and CEO. “It’s good for all our customers if we remain strong. The utility business is consolidating and we believe we’ll grow and get stronger.”
The deal comes as the energy market goes through further consolidation, including a recent acquisition of Progress Energy by Charlotte-based Duke Energy.
The deal would boost TECO’s customer base by 50 percent, and could lead to other opportunities in the Sunbelt region, Ramil said, while having little if any immediate impact on TECO’s local customers.
TECO expects the deal to close in the first quarter of 2014, pending state and federal approvals.
TECO will likely finance the deal with a combination of TECO Energy common equity, cash on hand and long-term debt at New Mexico Gas, TECO officials said, and TECO will absorb $200 million of New Mexico Gas debt.
TECO Energy also owns Peoples Gas System, serving about 345,000 customers in Florida. New Mexico Gas is a distributor, rather than producer, of natural gas, and purchasing New Mexico Gas would give TECO about 1.5 million regulated electric and gas utility customers in Florida and New Mexico, the utility said.
The deal comes as TECO is paring back operations in other regions. Last September, TECO announced a deal to sell its fuel handling and power production facilities in Guatemala for $227.5 million in cash.
Going forward, Ramil said the deal will give his management team a chance to learn new marketing tactics and for companies to swap their best practices. “I see New Mexico Gas Co. as a well-run business with, as yet, untapped growth potential.
TECO stock recently hit a 52-week high of $19.22 per share. On Tuesday, investors sold off the stock a bit, and the price fell 2.95 percent to close at $17.75 per share.