As part of its planned separation from Duke Energy, Duke Energy Field Services (DEFS) on Tuesday sold its wholesale propane logistics company, Gas Supply Resources (GSR), to master limited partnership DCP Midstream Partners LP for $77 million in cash and partnership units.

DEFS, a 50-50 joint venture of Duke and ConocoPhillips, owns the general partner of DCP Midstream Partners LP, and DEFS will change its name to DCP Midstream effective Jan. 1 (see Daily GPI, Oct. 9). By mid-2007, another $250 million of DEFS’ midstream assets will be transferred to the partnership.

According to DEFS, GSR is the largest wholesale propane logistics company in the northeastern United States, with six owned rail terminals, one leased marine terminal, access to several open-access pipeline terminals and 475,000 barrels of storage capacity. GSR also is building a new wholesale propane pipeline terminal in Midland, PA, which is expected to be completed in 4Q2006. The Midland terminal is located near Pittsburgh, and it will receive propane from a third party pipeline.

“GSR’s assets and business model are an excellent fit for DCP Midstream Partners,” said the partnership’s CEO, Mike Bradley. “They support our objectives to acquire businesses with organic growth opportunities, diversify our asset portfolio, and provide stable and increasing cash distributions to our unitholders. While these assets will have some seasonality to earnings, the baseload nature of the sales, along with our ability to tie the purchase and sales price of propane, allow us to mitigate commodity risk and generate fee-like earnings.”

Bradley said DCP is already “evaluating several organic growth projects to expand GSR’s business,” in addition to the new Midland terminal. “The market reception to the Midland terminal has exceeded our expectations. The terminal will provide better logistics for the propane community in this region, with good transportation access, and 2.3 million gallons of total storage capability.”

The $77 million purchase price of GSR includes the cost of the Midland terminal. The acquisition is expected to add $8.5 million to the partnership’s 2007 earnings, and it will be immediately accretive to unitholders on a per-unit basis. DEFS will continue to operate the GSR assets on behalf of the partnership after the transaction closes, which is expected in 4Q2006.

“We view DCP Midstream Partners as an integral growth vehicle for DEFS, and together with our parent companies Duke Energy and ConocoPhillips, we are supportive of its continued growth,” said DEFS CEO Bill Easter.

The conflicts committee of the board of directors of the general partner of the partnership recommended approval of the purchase and the terms of the transaction on behalf of DCP. The conflicts committee, which is comprised entirely of independent directors, retained independent legal and financial advisers to assist it in evaluating and negotiating the transaction. The partnership intends to finance the transaction with its existing credit facility.

©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.