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Williams Partners: An update

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World Pipelines,

Williams recently reported a net loss of US$405 million in 2Q16. While it blamed this largely on a US$747 million impairment charge related to the pending sale of its Canadian operations, the company is currently undergoing two legal challenges and is selling assets to Inter Pipeline.

Legal proceedings

According to Bloomberg, Williams Partners and its co-developers (including Cabot Oil & Gas, Piedmont Natural Gas and WGL Holdings) in the US$925 million Constitution natural gas pipeline are expected to prevail in at least one of two legal challenges to opposition.

“In a case before the US District Court for the Northern District of New York, Constitution is challenging the New York State Department of Environmental Conservation’s decision to require permits relating to impacts on wetlands,” Bloomberg reported. The developers are challenging New York’s denial of a water quality permit in a separate proceeding.

Last month, the FERC approved the 124 mile pipeline, which runs from the Marcellus shale region in Pennsylvania to markets in New England and New York, and granted the developers a two year extension – to December 2018.

Inter Pipeline deal

Inter Pipeline Ltd. has announced that it will expand its natural-gas liquids business, agreeing to acquire Williams’ Canadian oil and gas assets for CAN$1.35 billion. This includes infrastructure in Alberta –two plants near Fort McMurray that extract natural gas liquids – a gas processing plant near Redwater and a 420 km pipeline system connecting these.

Williams and Williams Partners are reported to have stated that they plan to use the proceeds to shrink debt. Oklahoma-based Williams says it spent about CAN$2.5 billion on the development of its Canadian business over the past 16 years.

To finance the deal, Inter will issue equity for proceeds of CAN$600 million. The company will sell subscription receipts at CAN$26.75 apiece, which will convert into common shares when the deal closes. Inter has also claimed that it aims to boost its revolving credit facility to CAN$1.5 billion from CAN$1.25 billion in order to help fund the transaction and it expects the acquisition to immediately boost its cash flow per share.

In the deal, Inter Pipeline may also acquire a proposed CAN$1.85 billion facility near Redwater, designed to turn propane into propylene pellets used in plastics manufacturing. Inter Pipeline says that it plans to make a decision by the end of the year on whether to go ahead with the facility, which Williams has already spent CAN$250 million developing.

Edited from various sources by Anna Nicklin

Sources: Bloomberg, BNN, Pittsburgh Post-Gazette, Seeking Alpha, The Globe and Mail

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