Omaha, NE-based TC PipeLines LP late Tuesday agreed to expand its reach in a $605 million transaction that would give it a one-quarter stake in two natural gas pipelines owned by TransCanada Corp.: Gas Transmission Northwest LLC (GTN) and Bison Pipeline LLC.
The 1,353-mile GTN system, with a design capacity of 2.9 Bcf/d, transports Western Canada Sedimentary Basin and Rocky Mountain-sourced gas to third-party gas pipelines and markets in Washington, Oregon and California, and connects with the partnership's Tuscarora pipeline system. GTN is supported by long-term contracts for 1.5 Bcf/d that mature between 2015 and 2028.
Bison, which was placed into service in January, traverses 303 miles, connecting Rockies gas to downstream markets in the Midwest via the Northern Border Pipeline Co.'s system, in which GTN owns a half stake (see Daily GPI, Jan. 19). Shippers have contracts for 0.4 Bcf/d on both Bison and Northern Border that expire in 2021.
"This acquisition represents a significant expansion of our natural gas pipeline business," said Steve Becker, who is president of TC PipeLines GP Inc., the general partner. TransCanada owns a 38.2% stake in the general partner. "Both GTN and Bison have long-term contracts in place and they also help to diversify the partnership's overall pipeline portfolio in terms of both markets and natural gas supply basins."
GTN, he noted, "is a critical piece of infrastructure which serves the California and Pacific Northwest markets" with a "desirable customer mix consisting primarily of local distribution companies and producers who have long-term contracts for a significant portion of the pipeline's capacity..." The interest in Bison "is strategic to our investment in Northern Border as it provides access to another source of supply flowing under long-term firm contracts."
With the addition of GTN and Bison, TC Pipelines would have stakes in six regulated interstate gas pipelines, noted Becker. The aggregate price paid by the partnership includes about 25% ($81 million) of GTN's debt. The acquisition is expected to be "immediately" accretive to the partnership's bottom line.
Initially the acquisition is to be funded through a $400 million bridge loan facility and the balance drawn from its $250 million senior revolving credit facility. The transaction is expected to close in May.
"The proceeds from the sale...will be used to help fund TransCanada's capital program," said CEO Russ Girling. "Once the transaction is complete, TransCanada will hold a 75% ownership interest in both pipelines and will continue to manage and operate these high-quality assets as part of its integrated North American natural gas transmission network."
Because TC PipeLines is an indirect subsidiary of TransCanada, the transaction "demonstrates one of the many options available to fund our current growth portfolio without additional common equity," Girling said.
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