JPMorgan Chase is poised to become one of North America’s largest natural gas traders with the purchase of RBS Sempra Commodities’ trading portfolio.
The US bank has agreed to pay around $220 million to take over North American gas and power contracts from the joint venture, which is partly owned by the Royal Bank of Scotland. The UK bank was ordered to divest its stake by the European Commission in exchange for state rescue funding.
JPMorgan bought the global oil, metals, coal and power and gas businesses of RBS Sempra in July for $1.6 billion, aggressively raising its commodity profile against entrenched rivals of Wall Street.
But the bank was initially hesitant about the North American assets because they overlapped with an existing power and gas group added during JPMorgan’s 2008 takeover of investment bank Bear Stearns. Uncertainty surrounding US financial reforms, enacted since, also weighed against a broader deal.
JPMorgan is now buying a trading book worth $6 billion gross as of June 30, according to RBS. The portfolio includes physical and financial gas and power transactions and access to pipelines and gas storage facilities. The approximately 750 trading counterparties include gas producers, power plants, utilities and governments. In the second quarter, RBS Sempra ranked fifth among North American gas distributors by volume, after BP, Royal Dutch Shell, ConocoPhillips and Macquarie, according to Platts. JPMorgan was 12th.
The sale announced Thursday “will complete the disposal of the last of the principal assets” of RBS Sempra, said RBS joint venture partner Sempra Energy. But JPMorgan isn’t hiring the 300 people who remain at RBS Sempra, up from 1,100 when the entire unit first went on sale. RBS said it was still considering “various alternatives for the company’s modest level of residual assets and liabilities”.
Last month, Hong Kong-based commodities trader Noble Group agreed to buy RBS Sempra’s retail energy unit for $317 million, plus the assumption of $265 million in debt. millions of dollars.
U.S. energy regulators must approve the deal, which the sellers expect by the end of the year.