TransCanada Corp. would become the operator of and control 100% of the Tuscarora Gas Transmission Co. after TC PipeLines LP completes a just-announced deal to buy Sierra Pacific Resources' 50% interest in Tuscarora for US$100 million. The deal follows recent transactions that will make TransCanada the operator of the Northern Border Pipeline next year.
TC PipeLines LP would also indirectly assume $37 million of Tuscarora debt. Upon completion of the transaction, the company will own or control 99% of Tuscarora. TransCanada Corp. indirectly holds the remaining 1% ownership interest. The transaction is expected to close by year end, subject to regulatory approvals. Sierra Pacific announced plans to sell its share of Tuscarora in July (see Daily GPI, July 11).
Tuscarora is currently operated by an affiliate of Sierra Pacific. TransCanada has provided gas control services for the Tuscarora system since late 2002. Tuscarora has firm transportation contracts for more than 95% of its available contracted capacity. A subsidiary of Sierra Pacific Resources holds contracts representing 69% of the total available capacity, the majority of which expire on Oct. 31, 2017.
"TC PipeLines LP is focused on delivering stable, sustainable cash flows and finding growth opportunities and we're pleased to continue to deliver on that goal," said Russ Girling, CEO of TC PipeLines GP, general partner of TC PipeLines LP. "The Tuscarora pipeline system is a high quality asset supported by long-term contracts."
This acquisition is expected to be accretive to the partnership's cash flow based on anticipated financing with a combination of bank debt and equity.
Tuscarora owns a 240-mile, 20-inch diameter, interstate system with a subscribed capacity of 180 MMcf/d. The Tuscarora system originates at an interconnection point with existing facilities of TransCanada's Gas Transmission Northwest System near Malin, OR, and runs southeast through northeastern California and northwestern Nevada, terminating near Wadsworth, NV.
The Tuscarora acquisition follows on the partnership's acquisition in April 2006 of an additional 20% of Northern Border Pipeline Co. (see Daily GPI, April 10), an interstate that transports gas from the Montana-Saskatchewan border to markets in the U.S. Midwest. Northern Border is a leading transporter of gas imported from Canada into the United States. TransCanada is slated to become the operator of Northern Border in April 2007.
TC PipeLines LP is a publicly traded limited partnership. It currently owns a 50% interest in Northern Border Pipeline Co., a Texas general partnership, and a 49% interest in Tuscarora Gas Transmission Co., a Nevada general partnership. TC PipeLines LP is managed by its general partner, TC PipeLines GP Inc., an indirect wholly owned subsidiary of TransCanada Corp. TC PipeLines GP Inc., also holds common units of the partnership.
In July TransCanada said that "changes in the competitive landscape" have resulted in significantly lower revenues for Gas Transmission Northwest Corp. (GTN), its wholly-owned interstate pipeline that serves markets in the U.S. Pacific Northwest and California. GTN is a dual pipeline that begins at an interconnect with TransCanada's BC System near Kingsgate on the Idaho-British Columbia border and traverses the states of Idaho, Washington, and Oregon before ending at interconnects with Tuscarora and Pacific Gas & Electric Co. at the Oregon-California border. The company has filed a rate case with the Federal Energy Regulatory Commission (FERC) (see Daily GPI, July 5).
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