Consolidated Edison Inc and Crestwood Equity Partners LP have announced that their subsidiaries have entered into definitive agreements to form a joint venture to own and develop Crestwood's existing natural gas pipeline and storage business located in northern Pennsylvania and southern New York.
Subject to customary closing conditions and purchase price adjustments, Crestwood will contribute its existing natural gas pipeline and storage business to a new entity, Stagecoach Gas Services LLC, and a subsidiary of Con Edison Transmission Inc, which is a wholly-owned subsidiary of Con Edison, will purchase a 50 percent equity interest in Stagecoach Gas Services for approximately US$975 million, with an implied market value of almost US$2 billion.
Stagecoach Gas Services, which will be managed by Crestwood and operated by a newly formed services company, will own four natural gas storage facilities (Stagecoach, Thomas Corners, Steuben and Seneca Lake) with a combined storage capacity of approximately 41 Bcf and three natural gas pipelines (MARC I, North/South and the East Pipeline) with a combined throughput capacity of 2,960 Mmcf per day.
These premier natural gas pipelines and storage facilities provide a critical link between robust natural gas supply sources and Northeast US demand markets. The assets boast a highly strategic asset footprint situated between robust Northeast natural gas supply sources and several leading U.S. natural gas demand centers, including New York City and New England.
Con Edison intends to finance the transaction with a combination of debt and new equity that is consistent with its capital structure. The transaction is expected to be substantially completed in the second quarter of 2016. The terms of the transaction were approved by the board of directors of Con Edison and Crestwood's general partner.
Barclays has provided committed financing and served as Con Edison's financial advisor and Latham and Watkins LLP served as Con Edison's legal advisor. Morgan Stanley served as Crestwood's financial advisor and Husch Blackwell LLP served as Crestwood's legal advisor.
Joseph P. Oates, President of Con Edison Transmission, stated:
"Con Edison is excited to become a joint venture partner with Crestwood to own and operate the Stagecoach pipeline and storage businesses. Crestwood shares our focus on employee and public safety, operational excellence and a commitment to protecting the environment. Our investment in these facilities supports our strategy for Con Edison Transmission to invest in energy infrastructure projects that will reliably deliver low cost energy supplies to customers, while earning competitive returns for our investors."
Robert G. Phillips, Chairman, President and Chief Executive Officer of Crestwood's general partner, commented:
"We are very pleased to enter into a strategic partnership with Con Edison to own and expand these important pipeline and storage assets as local supply sources are developed to meet the growing demand for natural gas in the Northeast markets. Con Edison brings years of market experience, as a leading Northeast natural gas distributer, as well as financial resources and growth perspective to compete for new regional infrastructure projects and provide enhanced market services to customers."