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Spectra Advances $3B Worth of Projects

Spectra Energy Inc. recently struck contracts to underpin three major pipeline projects, moving $3 billion worth of investment opportunities for the company into the execution column, a third brand-new pipeline to serve the Florida market among them.

Sabal Trail Transmission LLC is a joint venture of Spectra and NextEra Energy Inc. underpinned by a 25-year contract with Florida Power & Light Co. (FPL) (see Daily GPIJuly 29). When constructed, it will be the third pipeline to serve Florida with an initial capacity of more than 1 Bcf/d, Spectra CEO Greg Ebel said during an earnings conference call Tuesday.

"We're already in advanced discussions with other parties interested in contracting Sabal Trail capacity, so we expect volumes and returns on this project to build over time," Ebel told analysts following the company. "And we anticipate an in-service date in mid-2017."

Asked how much of the pipeline Spectra might actually end up owning, Ebel said it's too early to say but suggested a share of 50% would be about right. Besides FPL's participation through its NextEra unit, Williams has an opportunity to participate in the project "in a small way," said Ebel, adding that he expected other utilities to be contracting for capacity on the pipeline within the next 60-90 days.

In Marcellus and Utica shale country, Spectra is moving ahead with its Ohio Pipeline Energy Network project to carry gas from the two shale plays to markets both north and south, Ebel said. Chesapeake Energy is one of two anchor shippers on the $500 million, 550 MMcf/d project to expand the Texas Eastern Transmission system. "We expect to file our FERC application in the first quarter of 2014 with a targeted Nov. 1, 2015 in-service date," Ebel said.

Spectra's Algonquin Incremental Market (AIM) Project will support local distribution companies serving New England markets with a 300 MMcf/d expansion of the Algonquin Pipeline system, Ebel said. Capacity agreements are in place with utilities including Northeast Utilities and National Grid for the $850 million project. "We'll file with the FERC in the first quarter of 2014 with an expected completion date in the second half of 2016," Ebel said.

"Spectra Energy is in the midst of a major capital expansion program with $25 billion in growth opportunities through the end of the decade. That growth is the catalyst to advance our master limited partnership (MLP) strategy, which will efficiently fund growth and enhance Spectra Energy's dividend growth."

Spectra recently announced its intention to drop down the remainder of its U.S. storage and transmission assets into MLP Spectra Energy Partners (see Daily GPIJune 13), Spectra also will drop the other half of its Express-Platte oil pipeline assets, as well as all of the company's interest in the Sand Hills and Southern Hills pipelines. On Monday the dropdown was approved by both the Spectra Energy and Spectra Energy Partners boards and a contribution agreement was executed with the transaction expected to close by year-end.

 Spectra reported net income of $199 million (30 cents/share), compared with $215 million (33 cents/share) during the year-ago quarter.

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