(Reuters) - Swiss trader Mercuria has become the front-runner to buy the physical commodities unit of JPMorgan Chase & Co , one of the most powerful oil and metals desks on Wall Street, two sources told Reuters.
The terms are yet to be agreed and the details of what assets would be included are not known, but a deal would catapult Mercuria into the top tier of trading houses with Glencore Xstrata , Vitol and Trafigura .
JPMorgan's multi-billion dollar push to become Wall Street's biggest commodities trader began in 2008 with the purchase of Bear Stearns and peaked with the $1.6 billion deal to buy RBS Sempra's global oil and metals business in 2010.
The following are a selection of JPMorgan's physical trading assets and operations:
ASSET: POWER PLANTS, ELECTRICITY TOLLING AND MARKETING
DATE OF PURCHASE: March 2008 (JPMorgan buys Bear Stearns, including power subsidiary Bear Energy)
DESCRIPTION: The bank's commodity division, known as JPMorgan Ventures Energy Corporation, has electricity trading deals with U.S. power plants and wind farms totaling almost 3,000 megawatts of capacity - enough to light up each one of Indiana's 2.8 million homes.
In May 2013 the bank largely exited the Californian power market, where it has been embroiled in a market manipulation scandal, selling power interests totaling over 3,000 MW of capacity to Edison International.
The bank's commodity division also has an equity interest in three entities that own power plants in the United States, including the 545 MW Kinder Jackson facility in Michigan, the 230 MW Brandywine plant in Maryland, and a 75 MW biomass plant in Florida.
JPMorgan also owns interests in power plants and wind farms through its private equity arm, JPMorgan Capital Partners, and JPMorgan Infrastructure Investments Group, its asset management division.
In late 2007, Bear Stearns' commodity arm, Houston-based Bear Energy, acquired the rights to more than 9,000 MW of electric power output after purchasing Williams Power Co.
ASSET: Henry Bath, metals warehousing business
DATE OF PURCHASE: July 2010
SELLER: RBS Sempra
PRICE: Part of $1.6 billion RBS Sempra deal.
DESCRIPTION: When RBS Sempra was bought by JPMorgan for $1.6 billion in 2010, it was the second-largest warehousing company in the LME's vast network with almost 100 warehouses. Since then it has been eclipsed by Goldman Sachs's warehouse business Metro International and Glencore Xstrata's Pacorini, and with around 80 facilities in nine countries, it is now the fourth-largest based on the number of sheds.
The company was a founder member of the LME in 1877 and issued the first LME warrant on December 20 1883.
The company motto is "habere et dispertire" - to have and to share. Tracing its roots back to 18th century England, the Liverpool, UK-based company was eventually bought by Metallgesellschaft in 1986.
Until then, the company had largely been a trading house and ship operator. Hollywood actress Catherine Zeta Jones is reportedly named after the Henry Bath ship "Zeta" that was captained by her great grandfather.
STATUS: In mid-January, an official from the U.S. Federal Reserve said the regulator had given JPMorgan an "ultimate time limit" for selling its Henry Bath warehousing unit.
The Fed had been pressing JPMorgan to distance itself from its metals warehousing business for over a year. Since June 2012, the bank had tried unsuccessfully to turn the trading asset into an arm's length "merchant banking" investment in order to hold onto it, documents seen by Reuters showed.
RBS Sempra was earlier told by the Fed it had to divest Henry Bath within two years of the launch of its 2008 joint venture.
ASSET: (UBS) Commodities Canada
DATE OF PURCHASE: Feb 2009
DESCRIPTION: Bought from UBS in 2009, the Calgary-based trading division helped JPMorgan gain a foothold in the heart of the Canadian oil sands industry. It trades, transports and stores natural gas, crude and power.
"We provide extensive physical capabilities, specifically transport and warehousing, and specialize in trading and structuring across energy products, including oil, natural gas and power," the company says on its website detailing its Canadian operations.
The bank said in 2010 that it was growing its Natural Resources Group, hiring senior oil and gas traders in Calgary.
STATUS: The bank's long-term leases on over 6 million barrels of oil storage capacity in Hardisty, Alberta have been mentioned as one of its most valuable but lesser-known assets.
The tanks are owned by Enbridge Inc , and most of the leases are re-let to other companies operating in Alberta's oil patch, according to market sources.
LONG-TERM TRADING DEALS:
* NORTHERN TIER REFINERY: In December 2010, JPMorgan agreed to provide crude oil to Northern Tier Energy's 82,000 barrel per day (bpd) refinery in St. Paul, Minnesota.
It now supplies more than 90 percent of the refinery's crude, according to Northern Tier's SEC filings, including about 10,000 bpd imported from Canada in 2012, EIA data show.
* PHILADELPHIA ENERGY SOLUTIONS REFINERY: In the summer of 2012, JPMorgan agreed to provide financing and crude supply to the 335,000 bpd refinery in Philadelphia as part of a buy-out by the Carlyle Group .
Since September 2012 it had been importing some 250,000 bpd of crude from Nigeria, Chad and Azerbaijan.
The deal helped the bank treble its crude imports in 2012 to nearly 130,000 bpd, the data show, overtaking Morgan Stanley's crude and fuel imports for the first time ever.
(Reporting by Anna Louie Sussman, Jonathan Leff and Josephine Mason; Editing by Rosalind Russell)
- Bear Stearns
- Glencore Xstrata
- JPMorgan Chase & Co