Jeff Sterba -- chairman, president and CEO of PNM Resources -- said the sale is part of the company's strategic effort to focus on electric production and distribution and strengthen its financial position as the company prepares to make new investments in energy infrastructure.
The company expects to invest $1.7 billion over the next five years -- more than double the amount invested in the last five years -- to meet growing consumer demand.
Under the sale, about 800 PNM employees will transfer to Continental Energy, a Michigan-based utility holding company. Continental will more than double its customer base by acquiring PNM's operations, which now serve nearly 500,000 businesses and residential clients. Continental current natural gas businesses serve about 410,000 customers in Michigan and Alaska.
The proposed sale is subject to Hart-Scott-Rodino anti-trust review. It is expected to close at the end of 2008, after New Mexico state regulators rule on the deal.
In much of its 90-year history, PNM has been an electric company. It entered the gas business in 1985 as a result of an anti-trust price fixing lawsuit against the gas company's prior owner, Southern Union Co. (NYSE: SUG). PNM agreed at the time to purchase the gas company and work to restore health to its operations.
Sterba said in a prepared statement that Continental Energy is well-qualified to take over the gas operations.
"We are pleased to have found a quality, experienced natural gas delivery company to buy our New Mexico gas operations," Sterba said. "They'll have the opportunity to serve New Mexico with the same employees who serve them now."
George A. Schreiber Jr., president and CEO of Continental Energy, said the business will be re-named as New Mexico Gas Company and will be locally managed and headquartered here.
"New Mexico's strong economic potential, the markets served by PNM's gas assets and its skilled work force make this an attractive investment opportunity," Schreiber said. "We expect all PNM gas employees, along with those needed to support it administratively, will transfer to the new company after regulatory approval is received and the transaction closes."
Meanwhile, in a separate, smaller transaction, PNM Resources (NYSE: PNM) has agreed to pay $202 million to Continental to purchase Cap Rock Energy Corp., a regulated Texas electric business with 36,000 customers in north, central and West Texas. That transaction will be reviewed by the Public Utility Commission of Texas and the Federal Energy Regulatory Commission.
Sterba said net proceeds resulting from both transactions with Continental will be used to retire debt, fund future electric capital expenditures and for other corporate purposes.
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