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Tenaska Capital Launches Midstream Venture

Tenaska Capital Management LLC (TCM) has formed Houston-based Voyager Midstream LLC to develop, acquire and manage midstream gas assets. The company intends to seek acquisition opportunities in some of the hot producing regions as well as develop its own market-area gas storage projects.

"We are looking at market areas and, in particular, market areas where we see substantial new gas consumption trends, and those would include markets where new gas [-fired] generation is a key part of the consumption of natural gas on a going-forward basis," TCM Senior Managing Director Paul Smith said of Voyager's gas storage plans.

"When we do storage projects we like to provide those services to the energy companies that intermediate in a region, whether those be utilities or marketers. We usually contract the storage service out so that we can stabilize the cash flow of the entity on a reasonable basis to facilitate utilizing somewhat more debt as well as equity in the capital structure of the storage entity."

The Mid-Atlantic and Northeast are areas where the company will be looking to develop new storage capacity. "I believe that there's a sweet spot in the market for reservoir-based storage that has a working gas component that is mid-teens plus up to twice that amount with three to five turns," Smith said. "I think that kind of product is extremely valuable relative to its cost to develop in many regions. That's so broad a statement that it's certain to be untrue in some areas."

As for midstream assets, "There are obviously areas where we're seeing significant new production plays and those sorts of things," he told NGI. "We believe that we can bring capital and technical capabilities to investing in that space in those regions." Voyager will be looking for attractive buys in processing, gathering and transportation.

The Midcontinent and Appalachia are two regions offering midstream opportunities, Smith allowed, noting that Voyager will probably be "less focused" on the Rocky Mountain region. "I think we see some substantial new development in the Appalachian areas. We all know that's driven by the shale plays there," he said.

Voyager will be starting out with a strong relationship with the producer community, Smith said, thanks mainly to the large and physically focused gas marketing operation within the Tenaska family of companies. Tenaska's gas marketing business ranks 10th on NGI's list of top gas marketers (see NGI, June 23).

Voyager Midstream will be led by Tom Shaw, who will head a team focused on developing opportunities in the gas storage sector; and Ken Snyder, who will concentrate on locating non-storage midstream acquisition opportunities. Shaw is a geologist with more than 15 years experience in oil and gas exploration and production and six years developing gas storage facilities. Snyder, owner of Gulf Energy Development LLC and founder of three private companies, has held senior management positions at several large energy corporations.

Natural gas assets that TCM has managed include two gas storage facilities, Caledonia in Mississippi and Chestnut Ridge in Pennsylvania. Caledonia recently was sold to Enstor Inc. of Houston (see NGI, July 28), and Chestnut Ridge is being completed (see NGI, Dec. 24, 2007).

TCM is an affiliate of Tenaska Energy Inc., which is one of the largest independent power producers in the United States.

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