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May 14-18: Tax changes spark MLP merger mania; JEA tables privatization talks

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May 14-18: Tax changes spark MLP merger mania; JEA tables privatization talks

A look back at successes and setbacks in the energy industry.

Highs

MLP BUYOUTS — The Federal Energy Regulatory Commission's unfavorable decision to extinguish a tax benefit for pipeline master limited partnerships has sparked sector-wide consolidation with three major deals on May 17 alone. Williams Cos. Inc. announced it will roll up its MLP by acquiring the 256 million Williams Partners LP shares it does not already own for $10.5 billion. Moody's, Fitch Ratings and S&P Global Ratings are all weighing a credit upgrade for Williams in light of the proposal. Meanwhile, Canada's Enbridge Inc. offered to make a similar move with Enbridge Energy Partners LP and Spectra Energy Partners LP as part of a larger C$11.4 billion simplification deal. In addition, Cheniere Energy Inc. proposed buying out Cheniere Energy Partners LP's holding company, Cheniere Energy Partners LP Holdings LLC.

Between

ATLANTIC COAST — The U.S. Court of Appeals for the 4th Circuit on May 15 vacated a key permit from the U.S. Fish and Wildlife Service for the 1.5-Bcf/d Atlantic Coast natural gas pipeline project. The court found that the Fish and Wildlife Service failed to adequately limit the authority granted by the incidental-take permit, which allows developers to kill or otherwise affect endangered species during construction. An industry analyst and project developer Dominion Energy Inc. both said the court decision will not cause a significant delay to the construction schedule. "While this is a setback, Atlantic Coast can likely still go into service close to on time," said Rob Rains, an energy policy analyst at Washington Analysis LLC.

JEA — The board of directors for Jacksonville, Fla., municipal utility JEA unanimously decided May 15 to table any discussion or actions tied to possibly privatizing the entity. The JEA board said it is focused on resetting the discourse around the utility's potential sale and hiring a permanent CEO. City and utility officials on Feb. 21 officially launched a formal process to evaluate the sale of JEA after a departing JEA board member suggested in November 2017 that the utility should go private. The Jacksonville City Council, JEA's local regulator, set up a special committee and solicited Wall Street investment banks to handle a potential transaction. An outside consultant hired by JEA's board said the utility could be valued anywhere from $7.5 billion to $11 billion.

Lows

ENTERGY — The New Orleans City Council said May 18 that it is launching an investigation into Entergy New Orleans LLC and the use of actors paid to pose as supporters of the utility's gas plant proposal at regulatory meetings. A third-party investigator, possibly a former prosecutor or U.S. attorney, may be hired to assist the council or conduct an independent probe, council members said May 18. The Entergy Corp. subsidiary acknowledged in a May 10 report following an internal investigation that a subcontractor paid actors to publicly support the planned New Orleans Power Station. Council members said they will not decide whether to reconsider approval of the Entergy plant until after the investigation concludes.

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