If you don’t already have a master limited partnership IPO in the works, you might want to think about spinning one off while the getting is good. Just yesterday, another huge energy company announced it was planning to do exactly that.
New kid on the block
Thomas Farrell, CEO of Dominion Resources, Inc. (NYSE:D), the third-largest U.S. utility, made the MLP announcement during the company’s presentation at the Barclays Capital CEO Energy-Power conference yesterday. Bloomberg reported that the Virginia-based company plans to build its MLP around its stake in its Utica Shale joint venture, Blue Racer Midstream, and its Cove Point liquefied natural gas terminal in Lusby, Maryland.
Natural gas processing facility. Photo credit: Dominion
The LNG terminal is of particular interest now that the Department of Energy has granted its approval to export LNG to non-free trade agreement countries. Dominion Resources, Inc. (NYSE:D) has significant infrastructure in place at its Cove Point facility already, and need only add liquefaction capability, which the company estimates will cost between $3.4 billion and $3.8 billion. Construction is slated to begin next year, with a target completion date of 2017.
Dominion Resources, Inc. (NYSE:D) has already contracted all of the facility’s export capacity, signing 20-year contract agreements; just the sort of stable cash flow MLP investors love to see.
The company estimates that the new MLP will be capable of generating $1 billion in EBITDA initially, a number that could grow to $2 billion annually if Dominion Resources, Inc. (NYSE:D) were to drop down its natural gas pipeline assets to the partnership, as well.
Join the club
Dominion Resources, Inc. (NYSE:D) isn’t the only company reporting MLP news. OCI RES LP COM UNIT LTD PARTNERSHIP (NYSE:OCIR) officially started trading on the New York Stock Exchange today. The company is part of OCI Chemical, a Korean company, and produces soda ash in North America.
So far, the third quarter has averaged two MLP IPOs a month, after Phillips 66 Partners and Marlin Midstream Partners debuted in July, and QEP Midstream Partners and World Point Terminals hit the street in August.
We’re also expecting the Western Refining, Inc. (NYSE:WNR) spin-off to IPO sometime this year, as the refiner looks to follow in the footsteps of Phillips 66, and monetize its midstream assets. It hopes to raise $275 million in its IPO of Western Refining Logistics.
There’s a good chance we’ll see the Plains All American Pipeline, L.P. (NYSE:PAA) general partner go public by year end, as well. Plains All American Pipeline, L.P. (NYSE:PAA) made its announcement at the end of July, and anticipates raising $1 billion in its offering.