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With Wisconsin Extension Proceeding, Northern Border Adds to Guardian Ownership

With firm commitments for a 537,200 Dth/d expansion/extension of Guardian Pipeline, Northern Border Partners LP decided it was an opportune time to enlarge its stake in the Wisconsin pipeline system. The company announced last Thursday that it paid $77 million to Wisconsin Energy Corp. and WPS Resources Corp. for their separate 33.3% shares in Guardian. The deals give Northern Border 100% ownership of Guardian.

The 143-mile Guardian Pipeline system was put into service in 2002 and currently has a firm transportation capacity of about 750,000 Dth/d from the Joliet Hub near Chicago to a point west of Milwaukee. It is planning a 106-mile extension to Green Bay, WI, from Ixonia that would provide eastern Wisconsin with 537,200 Dth/d of new pipeline capacity.

Two major Wisconsin utility companies entered into natural gas transportation agreements in February to support the project (see NGI, Feb. 13). A Federal Energy Regulatory Commission decision on the project is expected in late 2007 and the extention would be put into service in November 2008.

"Consolidating Guardian's ownership adds strategic benefits to the [Northern Border] partnership as well as significant fee-based revenue under long-term contracts," said Northern Border Partners CEO Bill Cordes.

WPS said it expects an after-tax gain of $3.7 million from the sale of its 33.3% stake in Guardian for $38.5 million.

"Our investment in Guardian Pipeline generated positive returns for our company," said WPS CEO Larry Weyers. "When Northern Borders approached us regarding the sale of our interest in the pipeline, we thought it was a good opportunity for WPS Resources to redeploy the proceeds into other investment opportunities providing value to our shareholders."

Upon completion of the transaction, Guardian's financial results will be consolidated and reported in the partnership's interstate pipeline segment instead of reflected as equity earnings of unconsolidated affiliates on the income statement. Operating income and depreciation expense for Guardian for the full year 2006 are expected to be $20-23 million, and $6-7 million, respectively, Northern Border said.

The Guardian deal follows other significant transactions announced this year by Northern Border. In February, Oneok sold its gas pipelines, gathering, processing, storage and gas liquids assets to Northern Border Partners for $3 billion and 36.5 million limited partner units worth $1.65 billion. Oneok also used $40 million of those proceeds to buy TransCanada's 17.5% stake in Northern Border Partners. When the transactions are completed, Oneok will own a 45.7% share of Northern Border Partners (see NGI, Feb. 20). Northern Border Partners also owns Northern Border Pipeline, Midwestern Gas Transmission, Viking Gas Transmission, Bear Paw Energy, Crestone Energy and Black Mesa Pipeline, a coal slurry system in Arizona and Nevada.

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