Spectra Energy, Duke Energy's natural gas spin-off, is on target to spend more than a billion dollars on key growth projects this year, part of a three-year, $3 billion capital expenditure program designed to spur 5-7% annual earnings growth through 2009, CEO Fred J. Fowler said during the company's first quarter earnings conference call Tuesday.
The growth projects include a doubling of capacity on the U.S. portion of Maritimes & Northeast pipeline to 830 MMcf/d and connecting to the Canaport LNG terminal in New Brunswick, Canada at a cost of $320 million. The LNG terminal should be on stream by November 2008. Spectra has a firm contract for 730 MMcf/d of the capacity.
Spectra, which started operations as a separate company in January this year, also is spending $240 million on a greenfield project, a 16-mile, 24-inch diameter pipeline that will connect Excelerate Energy's LNG offshore receiving terminal off Boston to Algonquin's Hubline by late this year. The line will carry 800 MMcf/d, all of which has been subscribed under a 25-year contract.
A third project, a Southeast supply header requiring 270 miles of new pipe from the Perryville Hub in northeast Louisiana to a connection with Gulfstream Natural Gas near Mobile, AL, is scheduled to be completed in the summer of 2009. Spectra is partnering with CenterPoint Energy on this project, which will provide an alternative to offshore Gulf of Mexico gas for the Northeast in the winter and the Southeast in the summer. Fowler said Spectra's share of the project costs will run to $400 million. The line is 95% subscribed.
These projects, which total almost $1 billion of the $3 billion to be spent over the next three years will provide a catalyst for the expected 5-7% annual earnings growth from 2007 to 2009, Fowler said.
Meanwhile, Spectra said its first quarter 2007 net income of $236 million, or 37 cents per diluted share, compared with net income of $222 million in first quarter 2006. Ongoing net income was up 10% over first quarter 2006. This reflects strong ongoing operational results in both the U.S. transmission and distribution businesses along with lower tax rates, partially offset by severe weather impacts on operations and lower commodity pricing for the field services segment.
On Jan. 2, 2007, Duke Energy Corp. completed the spin-off of its natural gas businesses, which became Spectra Energy Corp. Prior-year results are those of Spectra Energy Capital LLC (Duke Capital in 2006), which is the financial statement predecessor of Spectra Energy Corp.
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