Con Edison to purchase stake in gas pipeline, storage venture for $975M

Dive Brief:

Consolidated Edison and Crestwood Equity Partners LP yesterday announced a new joint venture to own and develop Crestwood's existing natural gas pipeline and storage business located in northern Pennsylvania and southern New York.
Con Edison will purchase a 50% stake, valued at almost $1 billion, while Crestwood will contribute its existing natural gas pipeline and storage business to a new company. The new joint venture will operate as Stagecoach Gas Services LLC.
The transaction is expected to be "substantially completed" in the second quarter, the companies said.
The investment builds on a growing trend of electric utilities investing in gas assets to diversify their revenues and operational footprints, as well as nail down access to cheaper gas. In January, a subsidiary of Con Edison acquired a 12.5% ownership interest in Mountain Valley Pipeline, a proposed gas transmission line to link West Virginia with northern markets.

Dive Insight:

Con Edison joins a host of other companies, including Southern and Duke (and Con Edison itself, earlier this year), who see buying into gas as a way to stabilize returns and lock in cheaper generation.

"Con Edison is excited to become a joint venture partner with Crestwood to own and operate the Stagecoach pipeline and storage businesses," Joseph Oates, president of Con Edison Transmission, said in a statement. "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."

Con Edison will put $975 million into the 50-50 venture, giving Stagecoach an estimated value of close to $2 billion.

Stagecoach, which will be managed by Crestwood and operated by a newly formed services company, will own four gas storage facilities (Stagecoach, Thomas Corners, Steuben and Seneca Lake) with a combined capacity of approximately 41 Bcf. It will also own three gas pipelines (MARC I, North/South and the East Pipeline) with a combined throughput capacity of 2,960 million cubic feet per day.

The goal is to "expand these important pipeline and storage assets as local supply sources," said Robert Phillips, chairman, president and CEO of Crestwood's general partner.

"Con Edison brings years of market experience, as a leading Northeast natural gas distributor, as well as financial resources and growth perspective to compete for new regional infrastructure projects and provide enhanced market services to customers," Phillips said.

Stagecoach's assets will be in the "highly strategic" footprint between Northeast natural gas supply sources and several leading U.S. natural gas demand centers, including New York City and New England, the companies said.