Dive Brief:
- NextEra Energy used its second quarter earnings release this week to announce it would acquire NET Midstream, a privately-held company with seven gas pipelines in Texas, for $2.1 billion.
- The pipelines, with 3 billion cubic feet/day of capacity, serve power producers and municipalities in South Texas, the gas industry in the Eagle Ford Shale, and traditional demand in the Houston area.
- Company officials reported strong second quarter adjusted earnings of $102 million, putting NextEra on track for full year adjusted returns between $400 million and $440 million.
Dive Insight:
NextEra is a renewables giant, but the company said its bid for seven Texas gas pipelines may just be an initial foray into the space. The deal will provide attractive yields, help reduce the impacts of resource variability, and “establishes NextEra Energy Partners' presence in the long-term contracted natural gas pipeline space, providing a platform for future growth,” the company said.
Average contracts on the pipelines run 16 years, company officials said, with the acquisition including 3 Bcf/d of ship-or-pay contracts. And the three largest pipelines in the portfolio have planned growth and expansion projects could add an additional 1 Bcf/d of contracted volumes.
The largest of the pipelines, the NET Mexico Pipeline, is a 120-mile, 42-inch diameter pipeline that delivers gas from the Eagle Ford Shale to the Mexico border under a 20-year ship-or-pay contract with PEMEX. NextEra said the pipeline is “strategically positioned to provide low-cost, U.S.-sourced shale gas to meet the increasing demand of Mexico load centers and growing natural gas markets.”
The second largest pipeline in the portfolio, the Eagle Ford Pipeline, is approximately 158 miles long and is “anchored by a long-term, ship-or-pay commitment from an investment-grade producer.”
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The deal, subject to a waiting period under the Hart-Scott-Rodino Act, is expected to close within 75 days.