TECO Energy (NYSE: TE) has agreed to purchase Continental Energy Systems' New Mexico Gas Co. for $950 million, the company announced today.
"This acquisition is a significant step in achieving growth for TECO Energy," said TECO President and CEO John Ramil in a statement. "We are adding 50% to our customer base in a single transaction, and we expect it to provide opportunities for future growth in an attractive Sunbelt location. It will increase the percentage of earnings from regulated operations and reduce earnings volatility."
According to the release, TECO will finance the purchase through a combination of shares, cash on hand, and the assumption of $200 million of New Mexico Gas Co. debt. In the deal, TECO will be acquiring New Mexico Gas Intermediate, a subsidiary of Continental Energy that owns New Mexico Gas Co.
New Mexico Gas Co. serves 509,000 customers throughout New Mexico and notched $86 million in EBITDA for 2012 Ramil said the company is "a well-run business with, as yet, untapped growth potential. We look forward to sharing with New Mexico Gas Co. our significant marketing expertise and our commitment to economic development." The CEO noted TECO's success with Peoples Gas, West Florida Gas, and Griffis Gas as past examples of profitable acquisitions.
Subject to customary closing conditions, TECO expects the agreement to be finalized in Q1 2014, with the new subsidiary's earnings added to TECO's in time for FY 2015.