Shares of Crestwood Equity Partners LP CEQP soared higher by more than 35 percent Thursday morning following the announcement of a new joint venture with Consolidated Edison, Inc. ED.
Subsidiaries of both companies entered into an agreement on Thursday to form a joint venture in which they will jointly own and develop Crestwood's existing natural gas pipeline and storage business in norther Pennsylvania and southern New York.
The pipelines and storage facilities represent a "critical link between robust natural gas supply sources and Northeast US demand markets," the companies noted in their press release.
As part of the agreement, Con Edison Transmission, a unit of Consolidated Edison, will acquire a 50 percent stake in the new entity that will consist of Crestwood's natural gas pipeline and storage business. The company will pay $975 million for the stake, giving the new entity an approximate implied value of around $2 billion.
Con Edison will finance the transaction through a combination of debt and new equity. The deal is expected to be substantially completed in the second quarter of 2016 and has already been approved by the board of directors of Con Edison and Crestwood.
Joseph P. Oates, president of Con Edison Transmission, stated, "Con Edison is excited to become a joint venture partner with Crestwood to own and operate the Stagecoach pipeline and storage businesses. Crestwood shares our focus on employee and public safety, operational excellence and a commitment to protecting the environment. Our investment in these facilities supports our strategy for Con Edison Transmission to invest in energy infrastructure projects that will reliably deliver low cost energy supplies to customers, while earning competitive returns for our investors."
Robert G. Phillips, chairman, president and chief executive officer of Crestwood's general partner, commented, "We are very pleased to enter into a strategic partnership with Con Edison to own and expand these important pipeline and storage assets as local supply sources are developed to meet the growing demand for natural gas in the Northeast markets. Con Edison brings years of market experience, as a leading Northeast natural gas distributer, as well as financial resources and growth perspective to compete for new regional infrastructure projects and provide enhanced market services to customers."
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