Houston-based Spectra Energy Corp., which comprises the former natural gas businesses of Duke Energy, became a stand-alone, publicly traded company last Tuesday, emerging as one of the leading pure-play gas midstream companies in North America. The company’s stock began regular trading Wednesday on the New York Stock Exchange under the symbol SE.
Spectra Energy consists of Spectra Energy Transmission, formerly Duke Energy Gas Transmission, and a 50% interest in DCP Midstream, formerly Duke Energy Field Services, a top gas gathering and processor jointly owned with ConocoPhillips. Spectra Energy will focus on three areas: gathering and processing, transmission and storage, and distribution. The new company has about 7,300 employees in the United States and Canada.
Spectra Energy owns one of the three largest gas pipeline systems in North America, with more than 2.9 Tcf of annual throughput. The company also is one of the largest producers of natural gas liquids (NGL) in Canada, with total Canadian processing capability of 5.1 Bcf/d. In addition, it holds one the largest gas storage positions in North America, with about 250 Bcf of capacity, and has the second largest gas distribution company in Canada, Spectra Energy said. The DCP Midstream business is the largest NGL producer in the United States.
Spectra Energy Transmission expects to achieve a compounded annual growth rate of 7-9% in ongoing segment earnings before interest and taxes over the next year, said Martha Wyrsch, CEO of Spectra Energy Transmission. To accomplish this, the company plans to invest approximately $1 billion annually in expansion projects, she noted.
With approximately $21 billion of assets, Spectra Energy has a debt to total capitalization ratio of about 55%. The company said it expects to provide approximately 60% of its net income to shareholders in the form of annual dividends, with an initial annual dividend of 88 cents per share.
Duke Energy originally proposed separating its natural gas business from the company’s electric business when the merger with Cinergy was announced in May 2005. Last June, Duke Energy’s board of directors unanimously authorized management to pursue a plan to spin off Duke Energy’s natural gas businesses to Duke Energy shareholders (see NGI, July 3, 2006). With the spin-off completed, Duke Energy’s shareholders now own 100% of the equity in both Duke Energy and Spectra Energy.
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