Wednesday, April 7, 2010
El Paso Pipeline Approved
y Paul Ausick, Contributing Editor, InvestorPlace
A new 675-mile, 42-inch natural gas pipeline from the gas fields of Wyoming to a point in southern Oregon from where the gas will be fed to users in Oregon, California, and Nevada. El Paso Corp. (EP) received approval from the Federal Energy Regulatory Commission to proceed with its Ruby Pipeline project.
The pipeline will cost an estimated $3 billion and El Paso has accepted $700 million a private equity firm, Global Infrastructure Partners, which will eventually turn into a 50% stake in the project for Global. When it begins operation, which is currently scheduled for March 2011, the Ruby Pipeline will carry up to 1.5 billion cubic feet of natural gas per day.
Pacific Gas & Electric Co. (PCG) has signed on for 15 years for 375,000 cubic feet/day, which the company plans to use to generate electricity. PG&E is looking to import supplies of non-coal-fired generation in order to comply with California's strict clean energy laws.
Interestingly enough, PG&E also expects to spend about $23 million in 2010 to support a ballot initiative that would require local governments to get voter support before using tax receipts to establish electricity service. If passed, the initiative would change the California state constitution, and make it harder for local government to create alternatives to buying electricity from investor-owned utilities like PG&E. Critics of PG&E claim the law would stifle small, clean energy projects.
El Paso's share price has improved by about 70% in the past year, but is still down about 30% from where it was in August 2008. That puts it on a par with pipeline firm Williams Companies (WMB), but trailing pipeline master limited partnerships like Kinder Morgan Energy Partners (KMP), Enterprise Products (EPD), andDCP Midstream (DPM), all of which have seen share prices increase by 10%-20% in the same time period.
El Paso also recently sold majority interests in two of its LNG assets to El Paso Pipeline Partners LP (EPB) for $810 million. El Paso Pipeline was hived off from El Paso in 2007, and a subsidiary of El Paso is still the general partner of El Paso Pipeline.
The Ruby Pipeline announcement has moved El Paso shares up more than 2.5%, and the stock hit a new 52-week high as well.
Posted by Larry at 12:44 AM