Boardwalk Acquisition Company, LLC, a joint venture between
Boardwalk Pipelines Holding Corp., a wholly owned unit of
Boardwalk Pipeline Partners LP
), closed the purchase of PL Midstream LLC from PL Logistics LLC
for $625 million. The deal was announced in August.
The purchase was backed by Boardwalk Pipelines Holding's $268
million for equity ownership, Boardwalk Pipeline Partners' $132
million for its equity interest and a 5 year bank loan of $225
million. Boardwalk Pipelines Holding will own 67% of the JV and
Boardwalk Pipeline Partners will own the remaining 33%.
Boardwalk Pipeline Partners believes this acquisition will support
its diversification strategy as it will help it venture into the
natural gas liquids business. Natural gas liquids business
complements Boardwalk's core natural gas pipeline and storage
Natural gas is usually an attractive choice because of its relative
fuel efficiency, low emissions, quick construction timelines and
low capital costs. There is an abundance of natural gas in the U.S.
markets, resulting in lower prices. This trend is encouraging power
generators to not only convert their existing plants to gas-fired
ones but to build new nat-gas units.
PL Midstream boasts assets that can capitalize on the petrochemical
boom in the U. S. Gulf Coast region. Also, it has 53.5 million
barrels of salt dome storage capacity that includes 11.2 billion
cubic feet of working natural gas storage capacity, brine supply
infrastructure and 240 miles of pipeline transportation assets.
Additionally, it has fee-based contracts with an average
lifespan of 10 years. Therefore, with PL Midstream in Boardwalk
Pipeline portfolio, it will further fortify its presence as a
diversified midstream energy company.
BOARDWALK PIPLN (BWP): Free Stock Analysis
LOEWS CORP (L): Free Stock Analysis Report
To read this article on Zacks.com click here.
Loews Corporation currently holds a Zacks #4 Rank, translating into
a short term Sell rating, while Boardwalk Pipeline Partners LP
holds a Zacks #2 Rank, indicating a short-term Buy rating.