Thailand's Banpu buys Texas plant in US power-market push

[BANGKOK] Banpu Public Co will spend US$430 million to buy a Texas electricity plant that can be supplied by the Thai energy company's own natural gas, the first step of a push to expand into the US power market.

Banpu's BKV Corp, a US natural gas explorer, and its Banpu Power US Corp unit will own closely-held Temple Generation Intermediate Holdings II, which has a 768-megawatt facility. The deal is expected to close in the fourth quarter, Banpu said in a statement on Wednesday.

The move means that BKV's Barnett Shale operation, acquired last year from Devon Energy Corp, will directly supply gas to the power plant through long-term contracts. That's an unusual move for US shale producers, which typically sell their oil and gas into the market, and probably marks the beginning of a decade-long trend for exploration and production companies as they mature from the shale boom, according to BKV top boss.

"The natural way to mature your business is to integrate it into the value chain," BKV chief executive officer Christopher Kalnin said in a phone interview. The virtues of integrating gas and power operations include higher margins with relatively less risk, income diversification and stability, he added. "I suspect we're not the only ones thinking about this."

The acquisition is also a bet that increased reliance on renewable sources such as wind and power will benefit producers that can continue to supply power plants when the wind is not blowing and the sun is not shining.

"When you have a grid that's increasingly moving away from base load thermal and increasingly relying on intermittent renewables, you introduce great volatility to that grid, which means reliability becomes a premium," Mr Kalnin said.

The deal comes after a February storm in Texas wreaked havoc in electricity markets by knocking out supplies and fueling surges in power and natural gas prices. The Temple power plant was able to keep operating during the deadly event, according to the executive.

BKV's Barnett wells produced nearly 81 billion cubic feet of natural gas this year through May. They are connected to the Temple power plant through pipelines owned by Energy Transfer LP and Atmos Energy Corp.

BKV will pursue more acquisitions of US power assets including renewables as a way to fully offset carbon emissions from its gas business by the end of the decade, Mr Kalnin said.

Banpu said BKV is one of the top 20 natural gas exploration and production companies in the US. It has assets in Pennsylvania and Texas gained through a series of acquisitions since it was formed in 2015. Banpu Power also owns operations in Japan, China and Vietnam.

BLOOMBERG