Houston-based El Paso Corp. announced Friday it has agreed to sell its 14.4% interest in the Canadian and U.S. segments of the Alliance Pipeline, Aux Sable natural gas liquids (NGL) plant and associated facilities to Calgary-based Enbridge Inc. for an estimated $165 million. At the same time, Fort Chicago Energy Partners, also based in Calgary, AB, said it was taking steps to increase its share of the Canada-to-U.S. pipeline.

The Enbridge-El Paso deal comes only weeks after The Williams Cos. Inc. entered into a transaction to sell its 14.6% interest in the Canadian and U.S. portion of the Alliance system to Enbridge for C$270 million (see Daily GPI, Sept. 24). The purchase did not include Williams’ interest in the Aux Sable NGL facility, which processes all gas transported on the Alliance Pipeline.

In the end Enbridge, which currently has a 21% interest in Alliance, said it expects to pick up only 7% of El Paso’s interest in Alliance/associated facilities and approximately 10% of Williams’ interest in the pipeline after the other Alliance owners exercise their rights of first refusal (ROFR) over the deals. Fort Chicago Energy, which has a 26% ownership interest, said Friday it exercised its ROFR to acquire 5% of Williams’ share of Alliance for about $93 million, and has signaled it intent to buy 7% of El Paso’s interest. Duke Energy, owner of 24% of Alliance, is not expected to assert its ROFR. Fort Chicago is a partnership that was formed for the purpose of holding a share in Alliance and Aux Sable.

All told, Enbridge spokesman Jim Rennie said the company will likely acquire an additional 17% in Alliance at a cost of about C$300 million. This would bring its total share in Alliance to 38%, and its interest in Aux Sable to 31%. The two Canadian firms, Enbridge and Fort Chicago, assuming it picks up the additional 12% interest, would be equal owners in Alliance. Enbridge will not assume any of El Paso’s or Williams’ gas transportation commitments in the 1.5 Bcf/d pipeline, which extends from St. John, BC, to Chicago.

Both sales are part of El Paso’s and Williams’ efforts to improve their balance sheets that have come under increasing pressure during the past year in the wake of accounting and other scandals in the energy industry.

Enbridge’s and Fort Chicago Energy’s planned acquisitions of the El Paso and Williams interests are subject to regulatory approvals and receiving waivers, as well as accommodating the rights of the other Alliance and Aux Sable owners. The bulk of the Enbridge-El Paso transaction is expected to close by the end of the year, with a portion to be deferred until early 2003, El Paso said. The Enbridge-Williams deal is due to be completed during the fourth quarter.

“This transaction represents another important step in El Paso’s plan to reduce debt and strengthen our balance sheet,” said Chairman and CEO William A. Wise Friday. “As of today, we have announced sales of approximately $2.7 billion, including this transaction, and we are on track for the year-end target of $4 billion.”

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