Williams Partners L.P. ( WPZ ) got the federal nod for the expansion of its Transco natural gas pipeline. This expansion project − with total cost of $341 million − is intended to expand capacity by an added 250,000 dekatherms to better serve the emergent markets in the Northeast.
This expansion venture comprises the installation of around 12 miles of new pipe at different locations in Pennsylvania and New Jersey. It also includes a new 25,000 horsepower compressor facility in Essex County, New Jersey, as well as other facility modifications. The partnership expects the new line to be in service by November 2013.
The construction of the compressor station is expected to start this month, while the pipeline is scheduled for spring next year.
The Transco pipeline expansion is in sync with the Northeast Supply Link project, which is planned to develop the Transco Leidy Line and Transco mainline in Pennsylvania and New Jersey for shipping domestic supplies of natural gas to the northeastern markets.
Williams Partners' Leidy Southeast expansion project is aimed at serving the gas distribution companies in the local areas as well as electric power generators along the Atlantic Seaboard and throughout the southeastern U.S. This venture will be in-service by late 2015.
In contrast, the 10,200-mile Transco pipeline system delivers natural gas to markets throughout the northeastern and southeastern United States. Currently, it has a daily capacity of approximately 9.7 million dekatherms.
Williams Partners is an energy master limited partnership engaged in gathering, transportation, treating and processing of natural gas as well as fractionation and storage of natural gas liquids (NGLs). The general partner of the partnership is owned and managed by Williams Companies Inc. ( WMB ).
During the third quarter, the partnership registered lackluster earnings, which decreased 58.2% year over year in the wake of lower NGL margins. Higher costs related to developing new businesses purchased earlier in the year were also responsible for the decline in earnings. Hence, we remain apprehensive about the partnership's midstream segment owing to weak NGL price fundamentals.
Williams Partners retains a Zacks #3 Rank, which is equivalent to a short-term Hold rating.