Veresen said that it has closed the acquisition of certain natural gas gathering and compression assets supporting Montney development in the Dawson area of northeastern British Columbia from Encana and the Cutbank Ridge Partnership.
As part of this transaction, Veresen Midstream has agreed to undertake up to $5 billion of new midstream expansion for Encana and CRP in the Montney region, the company said in a statement.
The aggregate purchase price of the acquisition was approximately $760 million which is based on a reimbursement of Encana’s and CRP’s actual costs to date associated with the acquired infrastructure. The purchase price is comprised of approximately $435 million for operating compression facilities and pipelines, $155 million for work in progress associated with the Saturn compressor station, and $170 million for other work in progress, including the Sunrise and Tower gas plants and additional gas gathering pipelines. All infrastructure acquired and to be developed associated with this transaction is supported by 30-year fee-for-service arrangements with Encana and CRP.
Construction of the 200 million cubic feet per day Saturn compression station is nearly complete, with the facility expected to be operational in mid-2015. The 400 MMcf/d Sunrise gas plant and the 200 MMcf/d Tower gas plant are currently in advanced development, with construction expected to begin in the second half of 2015 and in-service dates anticipated in the second half of 2017.
Concurrent with this acquisition, Veresen contributed its Hythe/Steeprock gathering and processing assets to Veresen Midstream in exchange for a 50% equity position valued at $500 million and $420 million in cash, and KKR contributed $500 million in cash to Veresen Midstream in exchange for a 50% equity position. Veresen used its $420 million in cash proceeds to repay the majority of its bridge loan drawn in connection with its acquisition of a 50% convertible preferred interest in the Ruby Pipeline in November 2014.
Veresen Midstream also closed a US$575 million drawn Term Loan B and $1,350 million of largely undrawn syndicated credit facilities. Proceeds from these facilities, which are non-recourse to Veresen, will be used to fund the acquisition from Encana and CRP and ongoing infrastructure development.