NextEra Energy Partners to acquire Meade Pipeline in deal valued at $1.37B
NextEra Energy Partners announced a definitive agreement to acquire Meade Pipeline in a transaction valued at approximately $1.37B, including roughly $90M in future capital contributions through 2022, which are related to an expansion opportunity at the existing pipeline. Meade Pipeline owns a 39.2% interest in the Central Penn Line, a 185-mile intrastate natural gas pipeline that is an integral part of a pipeline system regulated by the Federal Energy Regulatory Commission, or FERC, that provides the Marcellus natural gas producing region access to large demand centers in the mid-Atlantic and Southeastern regions of the U.S. The pipeline has the capacity to transport and deliver up to approximately 1.7B cubic feet, or Bcf, of natural gas per day. The pipeline, which is backed by a minimum 14-year contract with an investment-grade-equivalent customer, is jointly owned by Transcontinental Gas Pipe Line Company, or Transco, which operates the pipeline as a segment of its larger Atlantic Sunrise project. Included in the transaction is an approximately $90M future expansion opportunity at the existing pipeline. The expansion is expected to add an estimated 0.6 Bcf per day of natural gas capacity to Central Penn through the addition of compression at new and existing stations. Meade will own 40% of the expanded capacity and receive an additional fixed-lease payment from Transco for 20 years from the in-service date. The expansion lease provides a guaranteed pre-tax unlevered return to Meade on capital expenditures for the project. As such, Meade and NextEra Energy Partners are protected from any potential cost overruns. Transco, the operator, filed its FERC application at the end of July. The expansion is anticipated to be completed in mid-2022, subject to receipt of all required regulatory approvals. The acquisition is expected to contribute annual run-rate adjusted EBITDA of $90M to $100M initially and $105M to $115M following completion of the expansion project. Five-year average annual cash available for distribution, or CAFD, is expected to be $60 million to $66 million on a run-rate basis, beginning Dec. 31, 2019. As a result of increased debt service following completion of the expansion project, a material step-up in CAFD is not expected at that time. Pending receipt of required approvals and other customary conditions and approvals, NextEra Energy Partners expects to close the transaction within the next 60 days.