As part of its efforts to divest some of the company's noncore assets, North American natural gas infrastructure specialist Spectra Energy said its Spectra Energy Midstream subsidiary has entered into an agreement with Keyera Facilities Income Fund (Keyera) under which Spectra Energy Midstream has agreed to sell all of its interests in the Nevis and Brazeau River natural gas gathering and processing facilities, located in Alberta, to Keyera for C$129 million.
"Part of our plan when we took the Spectra Energy Income Fund private was to rationalize non core assets held by the fund," said Doug Bloom, president Spectra Energy Transmission West. "This sale represents the timely execution of that plan."
The assets to be sold consist of 87 MMcf/d of sour gas processing capacity, an acid gas injection facility and an extensive sour gas gathering pipeline network at Brazeau River in Alberta, as well as 150 MMcf/d of sour gas processing, a natural gas liquid (NGL) fractionation and storage facility, and 354 kilometers of low pressure gas gathering pipelines associated with Nevis in Alberta.
Spectra Energy Midstream said it currently holds a 100% ownership interest in the Nevis facilities located 30 kilometers west of Stettler, AB. The company has a minority ownership interest in the processing facility and some related gathering facilities (currently operated by Keyera) located at Brazeau River, 170 kilometers southwest of Edmonton, AB, and a 100% ownership interest in compression and certain other gathering facilities connected to the Brazeau River plant.
Subject to receipt of required regulatory approvals and certain other conditions, the transaction is expected to close in the fourth quarter of 2008.
Keyera, which operates one of the largest natural gas midstream businesses in Canada, said the acquisitions are key additions to the fund's gathering and processing, NGL infrastructure and marketing growth strategies. Brazeau River is located in the foothills region of west central Alberta, an area currently experiencing "significant producer activity levels" and a region that the fund "believes will see considerable activity in the future," Keyera said. At Nevis, Keyera intends to integrate the NGL fractionation and logistics infrastructure with its existing NGL facilities and marketing business to enhance operational flexibility and expand product supply. The deal will increase Keyera's net sour gas processing capacity by 237 MMcf/d, or approximately 17%, to over 1.6 Bcf/d, making Keyera the largest sour gas processor in Alberta
Keyera has committed credit facilities in place sufficient to fund the transaction, including a commitment for an additional C$75 million short-term credit facility if required at closing.
"These acquisitions fit very well with our long-term growth strategy of increasing our ownership interest at our existing facilities and expanding our operations where we see opportunities for synergies with existing Keyera infrastructure," said Keyera CEO Jim Bertram. "The Brazeau River gas plant is a key facility for us in an area where we have a number of new growth initiatives underway. Higher ownership allows us to accelerate incremental business opportunities and the new gathering systems significantly expand our capture area. In Nevis, we are acquiring a sour gas processing facility with NGL fractionation and rail and truck facilities, which we intend to integrate with Keyera's other NGL infrastructure assets."
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