Oneok said Wednesday that it completed its previously announced $175 million purchase of Northern Plains Natural Gas, which owns 82.5% of the general partner interest and 500,000 limited partnership units (representing a 2.73% ownership interest) in Northern Border Partners LP. Oneok will now operate an additional 2,300 miles of regulated interstate gas pipelines with 4.3 Bcf/d of natural gas throughout in the Midwest.
Oneok bought its stake in Northern Plains from CCE Holdings LLC, a joint venture of Southern Union and GE Commercial Finance’s Energy Financial Services unit (see Daily GPI, Sept. 20). Northern Border’s assets include more than $2.5 billion in gas pipelines and processing plants in the Upper Midwest and Northern Rockies.
Oneok Chairman David Kyle said that ownership in the master limited partnership provides Oneok “the opportunity to participate in the acquisition of natural gas assets using the master limited partnership structure” which has special tax advantages. Kyle previously said he expected the Northern Border assets to serve as a “new growth vehicle” for Oneok. “We have been exploring the master limited partnership structure as a competitive alternative to tap investment capital for growth,” Kyle said in announcing the deal in September.
Northern Border Partners was formed in 1993 to acquire, own and manage pipeline and other midstream energy assets, focusing on fee-based transportation services with minimal commodity risk. Kinder Morgan, El Paso, Williams, Enterprise and other companies in the natural gas pipeline industry have made significant use of the master limited partnership structure.
Northern Border holds a 70% general partner interest in Northern Border Pipeline, a 100% interest in Midwestern Gas Transmission and Viking Gas Transmission, and a 33% interest in Guardian Pipeline. Northern Border also owns and operates gathering and processing assets in the Powder River, Wind River and Williston basins and also owns Black Mesa Pipeline, a 273-mile coal slurry pipeline traversing Arizona to a power plant in Laughlin, NV.
Oneok said the acquisition will be accretive to earnings and cash flow in 2005, and will be financed through available cash flow and short-term credit facilities. Also, the acquisition was subject to CCE Holdings closing its acquisition of CrossCountry Energy, LLC from Enron Corp (see related story).
Oneok is the largest gas distributor in Kansas and Oklahoma, and the third largest in Texas. It also is involved in oil and gas production, processing, gathering, storage and transmission primarily in the Midcontinent area.
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