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Sempra Energy to Sell Michigan, Louisiana Storage Assets for $250M

Sempra Energy has reached a definitive agreement to sell an indirect subsidiary whose principle assets are two natural gas storage facilities, Bluewater Gas Storage and Pine Prairie Energy Center, for approximately $250 million to a joint venture of Plains All American Pipeline LP and Vulcan Capital.

Bluewater Gas Storage, located in St. Clair, MI, has 20 Bcf of storage capacity that went into operation in May 2004. Pine Prairie is a planned salt-cavern storage project with expected capacity of 24 Bcf under development in Evangeline Parish, LA.

The transaction, which calls for the sale of Sempra Energy's indirect subsidiary Energy Center Investments Corp., is subject to the approval of the Federal Trade Commission under the Hart-Scott-Rodino Act, the San Diego, CA-based energy company said. The sale is expected to close this month.

Plains/Vulcan Gas Storage LLC, which is 50% owned by Houston-based Plains All American and 50% owned by a subsidiary of Vulcan Capital, said it anticipates investing an additional $260 million over the next several years to complete the development of Pine Prairie. Vulcan is the investment vehicle for billionaire investor Paul Allen, who was co-founder of Microsoft Corp.

"Due to current favorable market conditions, we believe this is an opportune time to monetize these gas storage assets, which are not critical to our liquefied natural gas (LNG) and gas infrastructure strategy," said Mark Snell, group president of Sempra Global, the umbrella for Sempra Energy's businesses operating in competitive energy and commodity markets.

However, "we remain committed to developing gas storage and pipeline assets consistent with our strategy to meet growing energy demand in North America."

Through its Sempra Pipelines & Storage unit, Sempra Global has signed binding agreements and will construct, own and operate the Cameron Interstate Pipeline, a 35-mile, 36-inch diameter gas pipeline that will connect Cameron LNG, a terminal being constructed by affiliate Sempra LNG near Lake Charles, LA, to interstate and intrastate pipelines.

Sempra Pipelines & Storage also is developing Liberty Gas Storage, a 17 Bcf salt cavern storage facility in Calcasieu Parish, LA, located about 200 yards from the Cameron Pipeline, the company said. Liberty Gas is expected to be operation next year, while Cameron LNG and the Cameron Interstate Pipeline are targeted for in-service in 2008, it noted.

In addition, Sempra Pipelines & Storage signed a memorandum of understanding with Kinder Morgan Energy Partners in mid-August to develop a 1,500-mile pipeline to move natural gas from the Rocky Mountain region to the upper Midwest and East Coast (see Daily GPI, Aug. 18). Sempra Energy said the two companies expect to hold an open season later this year to determine market interest.

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