Jordan Cove Developer Sells Power Generation Assets for $1.18 Billion

The Jordan Cove LNG export project and related pipeline received some good news recently with parent company Veresen Inc. announcing on February 21 that it has reached agreements to sell its power generation business for $1.18 billion.

The agreements with different companies create more flexibility for Veresen to pursue all its capital expenditure projects, including those being developed by Jordan Cove Energy Project LP and Pacific Connector Gas Pipeline LP, a spokesman for Jordan Cove told The Foster Report February 21.

“The stronger the parent company is, the better off we are,” the Jordan Cove spokesman said.

Veresen, based in Calgary, Alberta, reached agreements with different companies to sell the power generation assets in three separate packages, it said in a February 21 statement.

The company announced in August of 2016 that its power generation assets were on the auction block and that it was divesting them because they are not complementary to its core natural gas and NGL infrastructure business. The assets included about 625 MW of generation assets, mainly using renewable resources and natural gas-fired facilities.

The divestiture “strengthens our balance sheet, further underpinning our dividend and providing greater flexibility to fund the incremental growth projects we expect to secure over the next 12 to 18 months,” according to Don Althoff, president and CEO of Veresen.

Veresen did not identify the buyers of the generation facilities.

One of the buyers, however, issued a statement indicating that it purchased interests in two gas-fired projects and two waste heat generation assets with a net capacity of 294 MW. Capital Power Corp. on February 21 said it purchased the facilities for $225 million in cash and the assumption of $275 million of project level debt.

The generation facilities have long-term power purchase agreements with the Ontario Independent Electricity System Operator and BC Hydro, Capital Power said.

The transactions for the generation assets are subject to closing adjustments and conditions customary in such deals, and closing is expected to take place in the second quarter, subject to receipt of all necessary approvals, Veresen said.

Jordan Cove on February 10 issued a statement that it is working with FERC to schedule open houses and other steps in the pre-filing process for another application to build the LNG export terminal at Coos Bay, Oregon, and Pacific Connector to send feed gas to the facility.

The second application is being pursued after FERC, in March 2016, denied the company’s initial application based on a lack of demonstrated need for the pipeline, with no contracts or precedent agreements to account for the pipeline’s capacity.

Jordan Cove and others sought rehearing of that ruling, with the developer indicating it had since reached agreements with customers for more than 75% of the pipeline’s capacity and about 50% of the LNG project’s initial design capacity. FERC denied rehearing and declined to reopen the record to accept the new evidence of market demand for the project, which was praised by environmental groups and opponents of the project. FERC noted in its 12/9/16 decision that the developer could pursue a future application and that the Commission may use portions of the existing record, such as the Final Environmental Impact Statement from September 2015, to process a future application.[1]

As an initial step to file a revised application, Jordan Cove asked to use FERC’s pre-filing review process, and that request was approved in a 2/10/17 ruling (PF17-4) from the Commission’s Office of Energy Projects. Jordan Cove and Pacific Connector intend to file their applications on or about 8/30/17, FERC indicated.

The ruling on the pre-filing review request identified Tetra Tech as the third-party contractor to work under the direction of FERC in the scoping and environmental review processes.

The planned LNG terminal at Coos Bay would consist of a gas processing plant, liquefying equipment, two storage tanks and other facilities designed to liquefy about 7.8 metric tons annually for exports to Pacific Rim markets, while Pacific Connector would involve construction of a 36-inch diameter pipeline extending about 233 miles from Malin, Oregon, to Coos Bay.

Once the open houses are scheduled in the pre-filing process, Jordan Cove will publicize them and provide the public an opportunity to learn more about the projects, it said in its February 10 statement.

“We have invested more than a decade in optimizing the engineering design and minimizing our environmental footprint through scientific analysis and community feedback,” said Betsy Spomer, CEO of Jordan Cove. “We are confident Jordan Cove will receive regulatory approval and contribute significant direct and indirect benefits to southern Oregon,” Spomer said.

By Tom Tiernan TTiernan@fosterreport.com

[1]   See, Jordan Cove LNG Developer, Others Respond to FERC Denying Rehearing on Project, Related Pipeline, FR No. 3128, pp. 15-19.

 

This article appears as published in The Foster Report No. 3137, issued February 24, 2017

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