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  • February 2003 (Revised May 2003)
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Mobile Energy Services Company

By: Benjamin C. Esty and Aldo Sesia
  • Format:Print
  • | Pages:18
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Abstract

When Al "Chainsaw" Dunlap became CEO of the Scott Paper Co., the company owned a large, vertically integrated production facility in Mobile, Alabama. Dunlap sold part of the production facility, a cogeneration power plant (later known as Mobile Energy Services Co.), to the Southern Co. for $350 million. This case is set in August 1995, when Mobile Energy Services Co. was trying to issue two bonds worth $340 million to refinance its acquisition bridge loans. Potential bond investors must consider the risks associated with an "inside the fence" energy complex. In particular, they must consider how the transformation from a vertically integrated to a vertically separated facility will affect the power plant's creditworthiness and whether the contractual agreements that bind the parties and govern the operations will be as effective as uniform ownership. Because of vertical separation, Mobile Energy Service's ability to service its debt obligation depends on the long-term viability of the energy supply contract it has with the mills.

Keywords

Mergers and Acquisitions; Risk and Uncertainty; Contracts; Agreements and Arrangements; Investment; Projects; Vertical Integration; Energy Sources; Bonds; Ownership; Restructuring; Energy Industry; Alabama

Citation

Esty, Benjamin C., and Aldo Sesia. "Mobile Energy Services Company." Harvard Business School Case 203-061, February 2003. (Revised May 2003.)
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About The Author

Benjamin C. Esty

Finance
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