Continuing the consolidation in the retail electricity business, New Power Co., a unit of NewPower Holdings Inc., said it will acquire AES Power Direct, the retail marketing arm of AES Corp.
New Power will also acquire CoEnergy, a unit of DTE Energy Co., Detroit, Mich., with customers and natural gas inventory related to the Columbia Gas of Ohio and Dominion East Ohio gas customer choice programs.
With the acquisitions, New Power will get 82,000 natural gas and electric customers in Ohio and about 38,000 natural gas customers in Ohio. From AES Power Direct, New Power will get natural gas inventory, supply and transportation contracts, and infrastructure, including billing and customer service in Peoria, Ill. and Toronto, Ont. A company spokeswoman did not release customer acquisition costs or the terms of either transaction.
The AES deal marks the complete exit by AES Corp., Arlington, Va., from residential sales of electricity and gas. Sources close to New Energy, a unit of AES, said AES had been “shopping Power Direct around” for about 6 months.
AES will concentrate through its unit New Energy on retail sales to large commercial and industrial customers. Residential sales of electricity require a large “critical mass” of customers to make it profitable, sources said. Fixed costs of acquiring energy and back office expenses as well as customer acquisition costs must be spread among a large group of customers to make retail residential sales profitable.
New Power Co., Purchase, NY, is in the process of acquiring customers to reach that critical mass, according to US Security and Exchange Commission documents. At the end of the first quarter, the company had 630,000 retail customers, excluding customers acquired in Thursday’s transactions.
New Power’s parent reported a loss of $50 million on $126 million in revenue for the first quarter of 2001, compared to a loss of $7 million on $2.1 million for the comparable quarter last year. The company said expenses had increased to 93% of revenue, compared to 84% for last year’s comparable quarter.
The increased costs reflected higher costs of providing energy to more customers, according to SEC documents. Losses are expected to continue for a “period of time.” Enron Corp. has a 44% equity stake in NewPower Holdings.