Williams has sold its interests in the Wamsutter LLC system to its midstream partnership Williams Partners LP for $750 million, the company said Friday.
The Wamsutter system includes a 1,700-mile natural gas gathering system in the Washakie Basin in south-central Wyoming and the Echo Springs cryogenic processing plant near Wamsutter, WY.
The transaction structure would allow Williams Partners to receive cash flows from the existing Wamsutter business and at least 5% of the increase in cash flows resulting from growth of the existing business with Williams.
Under the terms of the agreement, Williams Partners would acquire 100% of the Class A interest in Wamsutter and 50% of the initial Class C units; Williams would retain 100% of the Class B membership interest in Wamsutter and 50% of the initial Class C units. Williams would also retain the right to make material expansion investments in return for additional Class C units, which will entitle it to receive an increased portion of the growth in cash flows. Williams could then offer these additional Class C units to Williams Partners, but the partnership would not be obligated to purchase them.
The acquisition, which is expected to close by the middle of December, would be immediately accretive to distributable cash flow for Williams Partners. Distributable cash flow attributable to Wamsutter was $48.1 million for the first nine months of 2007. For the same period in 2006, distributable cash flow was $42.9 million. Williams agreed to contribute funds to Williams Partners from 2008 through 2012 to limit general and administrative expense to defined levels. Under those terms, Williams Partners would have received an additional $4.5 million from these contributions in the first nine months of the year.
Williams Partners plans to finance the purchase of the Wamsutter Interests with a combination of debt and equity, including equity issued directly to Williams. The conflicts committee of the board of directors of the general partner of Williams Partners recommended approval of the acquisition. The conflicts committee, which is composed entirely of independent directors, retained independent legal and financial advisers to assist it in evaluating and negotiating the transaction.
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