Williams Partners LP and Williams signed a tentative agreement for the dropdown of the membership interest in the company that owns the Wamsutter gas gathering and processing system to the partnership, the companies said Thursday.

The nonbinding letter of intent specifies that Williams Partners would pay $750 million for the interest. The Wamsutter system includes the Echo Springs cryogenic processing plant and related gas gathering system near Wamsutter, WY. Wamsutter is a station on the landmark Rockies Express Pipeline (REX). The first 328-mile segment of REX, which runs from the Meeker Hub in Rio Blanco County, CO, to the Wamsutter Hub in Sweetwater County, WY, and to the Cheyenne Hub in Weld County, CO, is in service and has a current capacity of 500,000 Dth/d (see Daily GPI, Oct. 30).

Once an approved definitive agreement is reached, the deal will be subject to standard closing conditions. The letter of intent provides for Williams Partners to receive cash flows from the existing Wamsutter business and share with Williams the increase in cash flows resulting from growth of the existing business. Williams will retain the right to make, and receive cash flows from, material expansion investments. Williams could then offer such expansion assets to the partnership, but Williams Partners would not be obligated to purchase any such expansion assets.

Williams Partners plans to finance its payment of the purchase price through a combination of equity, debt, cash on hand and/or equity issued directly to Williams.

Once complete, the Williams transaction is expected to be immediately accretive to distributable cash flow for Williams Partners on a per unit basis for Williams Partners’ unitholders.

“The addition of an interest in the Wamsutter System to our growing portfolio of assets should provide the partnership with additional scale and increased diversity in its cash flows,” said Alan Armstrong, chief operating officer of the general partner of Williams Partners. “Once the deal is complete, Williams Partners will own assets serving several stable and high-growth potential basins.”

“In addition to providing Williams with access to low-cost capital for Williams to invest in high-growth potential areas such as the Piceance Basin and deepwater Gulf of Mexico, additional dropdown transactions put us into a higher returns position as the general partner of Williams Partners,” said Williams CEO Steve Malcolm said.

The Echo Springs plant has a processing capacity of nearly 400 MMcfe/d.

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