Centrica-owned Direct Energy to buy PNM Resources' Texas-based electricity provider First Choice Power for US$270M in cash, plus additional working capital; deal expected to close in Q4 2011
September 23, 2011
– Continues Growth in North America and Solidifies Texas Business
Direct Energy, North America's largest competitive energy and energy-related services company, has reached an agreement to acquire Texas-based electricity provider First Choice Power, a subsidiary of PNM Resources (NYSE: PNM), for US$270 million in cash plus additional working capital.
Headquartered in Irving, Texas, First Choice Power supplies retail electricity to both residential and commercial customers across Texas. The acquisition provides Direct Energy, the North American subsidiary of Centrica plc, with a strong position in the largely rural Texas-New Mexico Power territory and a growing small commercial customer base. In addition, First Choice Power was the first retail electricity company in Texas to enter the smart meter prepaid business, reinforcing Direct Energy's position in selling prepaid electricity. Direct Energy will also benefit from significant synergies after the businesses are fully integrated as a result of significant improvements it has made in its operational platform in recent years.
"First Choice Power is an attractive addition to Direct Energy's North American downstream business," said Chris Weston, President and CEO of Direct Energy. "We continue to pursue our growth strategy for North America with strong organic customer growth, nearly $1 billion in acquisitions completed in the last 18 months and continued operational improvements across all areas."
The addition of First Choice Power represents the latest step in Direct Energy's plans to grow its North American business. Earlier this year, Direct Energy added to its residential and commercial customer base with the acquisition of Gateway Energy Services, one of the largest independent retail energy (electricity and natural gas) providers in the U.S. Northeast. In 2010, Direct Energy increased its natural gas reserves by approximately 60 percent with the acquisition of Suncor Energy's assets in the Wildcat Hills region of Alberta, Canada. The company also acquired Clockwork Home Services, Inc., making it North America's largest home energy services company.
"Combining the forces of First Choice Power and Direct Energy will create an even stronger player for the Texas market with a shared focus on putting customers first," said Pat Vincent-Collawn, President and CEO, PNM Resources. "The companies have a complementary customer base and a tradition of providing innovative products and services for their customers."
"Direct Energy is already a leader in the Texas retail electricity market and today's acquisition of First Choice Power further strengthens our state-wide position as we deliver on our plan to grow the company's North American business," said Steven Murray, President of Direct Energy Residential. "First Choice Power brings a good-sized customer base onto our Texas business platform and will help us continue to innovate and bring better products to Texas consumers."
The transaction is subject to regulatory review and is expected to close during the fourth quarter of 2011.
About Direct Energy
Direct Energy is one of North America's largest energy and energy-related services providers with over 6 million residential and commercial customer relationships. Direct Energy provides customers with choice and support in managing their energy costs through a portfolio of innovative products and services. A subsidiary of Centrica plc (LSE: CNA), one of the world's leading integrated energy companies, Direct Energy operates in 46 states plus DC and 10 provinces in Canada. To learn more about Direct Energy, please visit www.directenergy.com.
About First Choice Power
First Choice Power of Irving, Texas, is an energy company committed to identifying what is most important to our customers and putting their needs first. Texas business and residential customers can depend on First Choice Power for competitive pricing and excellent customer service. First Choice Power is committed to giving back to the communities it serves through its Food First ™ hunger initiative, Reduce Your Use Grants™, recycling efforts and supporting employees' community engagement. Learn more at www.FirstChoicePower.com. Keep up to date on the latest energy news and join the conversation by following us on Twitter @firstchoicepwr, Facebook at facebook.com/FirstChoicePower or The Current blog, www.firstchoicepower.com/blog.