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Plains in $7.2B deal to simplify structure; Northland Power exploring strategic options

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Insight Weekly: Labor market recovery hurdles; power market integration; nonbank M&A hunt

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ESG & Technology: Impacts and Implications

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Q&A: Q2'21 Power Forecast: Overheated Power Markets are Here – Who Wins, Who Loses, and Why?

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Essential Energy Insights - October 2021


Plains in $7.2B deal to simplify structure; Northland Power exploring strategic options

Top news

Followingthe footsteps of other major midstream operators seeking to reduce their costof capital, Plains All AmericanPipeline LP has struck an agreement to simplify the ownership andgovernance structure of the partnership and related companies. In a transactionvalued at about $7.2 billion, Plains All American will issue 245.5 million sharesto an affiliate of general partner Plains GP Holdings LP, in exchange for permanentlyeliminating the incentive distribution rights and other economic rights PlainsGP holds.

Democratsstand a good chance of taking over the U.S. Senate in 2017, but their abilityto shift course on energy may be constrained by a likely GOP majority in theU.S. House of Representatives and the potential for Republicans to reclaim theSenate in 2018 midterm elections.

TheUnited Mine Workers of America has reached a tentative labor agreement withAlpha Natural ResourcesInc. and its spinoff Contura Energy. The deal with Contura, one ofthe companies thatwill control many of Alpha's core assets as it emerges from Chapter 11bankruptcy court protection, will cover around 800 workers at the Cumberlandand Emerald mines in Pennsylvania, the McClure preparation plant in Virginiaand the Power Mountain preparation plan in West Virginia.

Power

*Northland Power Inc.has commenced a strategic review of the business. Without disclosing anyinformation, James Temerty, the company's founder, largest shareholder andchair, saidNorthland Power plans to position itself so it could capitalize on renewableenergy infrastructure development opportunities. CIBC World Markets Inc. andJ.P. Morgan Securities LLC will act as the company's financial advisers. Thecompany owns or has a net economic interest in 1,394 MW of operating generatingcapacity and 932 MW, 642 MW net to Northland, of generating capacity underconstruction.

*The Clean Air Act lacked thetools to offer a life raft to the struggling nuclear industrywithin the Clean Power Plan, a U.S. EPA official said July 11. Speaking at theU.S. Energy Information Administration conference in Washington, D.C., theEPA's Joseph Goffman, associate assistant administrator and senior counsel,said the agency originally pitched more nuclear-specific policy in the proposedversion of the Clean Power Plan that was released in June 2014. But in theensuing public comment period, stakeholders urged the agency to abandon thelanguage.

*The Obama administration has threatenedto veto H.R. 5538, saying the bill underfunds core U.S. Department of the Interiorprograms as well as the U.S. EPA's operating budget. Among other sections, theadministration said it strongly opposes section 120 of the bill, which wouldprohibit the DOI from finalizing or implementing the proposed Stream ProtectionRule; and sections 122, 127, 440 and 441, which the administration said wouldundermine the U.S. Bureau of Land Management's authority to effectively overseeonshore fossil energy production on public land.

*Hunt ConsolidatedInc. has swapped 3,142,378 common shares of for an equal number ofcommon units in InfraREIT's operating partnership held by a subsidiary, accordingto a SEC filing. Theexchange hadno effect on securities owned by Hunt and had no effect on its fullydiluted ownership of InfraREIT.

*The North Carolina Waste Awareness and Reduction Network, or NC WARN, and TheClimate Times intendto appeal a decision by state regulators that requirea $98 million bondfor their challengeto a construction permit for DukeEnergy Progress LLC's proposed Asheville combined-cycle gas plant.

Natural gas/midstream

*Royal Dutch Shell plcand its partners have again postponed a finalinvestment decision on the proposed LNG Canada project due to globalindustry challenges, including capital constraints. The decision was plannedfor end of 2016. Other partners on the project are PetroChina Co. Ltd., Mitsubishi Corp. and Korea Gas Corp.

*'s decision to bringin Southern Co. as anequal partner on the SouthernNatural Gas Co. LLC pipeline system is a toshareholders after the midstream giant was forced to slash its quarterlydividend in 2015, Chairman Richard Kinder said.

* A number of prominent energy companies, includingSouthwestern EnergyCo., agree that measures to further contain methane during natural gasproduction and distribution are warranted, though smaller producers argue thatmeeting such costly requirements would only prompt producers to close theirwells — resulting in job losses, TheNew York Times reports.

*Researchers from the University of Colorado have found that more than 95% ofmethane contamination of groundwater occurs due to naturally occurringmicrobial processes near underground coal seams instead of hydraulicfracturing, TheDenver Post reports.

* EnableMidstream Partners LP has completedthe 200-MMcf/d Bradley II natural gas processing plant in Grady County, Okla.The plant will provide natural gas supply into Enable's interstate andintrastate transportation pipelines for delivery to downstream markets in themidcontinent and southeast U.S., President and CEO Rod Sailor said in a statement.

*EnLink Midstream PartnersLP pricedan upsized offeringof $500.0 million of 4.850% senior notes due 2026 to help repay outstandingborrowings under its revolving credit facility and for general partnershippurposes.

Coal

*Électricité de France SA is looking to offload its coal trading operation toJapan's Jera Co., a joint venture formed by Tokyo Electric Power Co. andChubu Electric PowerCo., according to TheWall Street Journal. The rumored sale comes as other global energyfirms, including TotalSA and EngieSA, have taken steps to reduce their exposure to coal, the Journal reports.

*Bankrupt coal minerPeabody Energy Corp.recently sought court approval to pay nearly $30 million in property taxesaround the country, noting that its inability to do so was affectingjurisdictions where it was a key taxpayer, TheAssociated Press reports.

*Glencore Plc's A$1billion Hunter Valley coal train network received separate bids during the July 11 auction frommajor coal carriers Aurizon Holdings Ltd., Asciano Ltd.'s Pacific National andU.S.-listed Genesee & Wyoming Inc., TheAustralian Financial Review's Street Talk reported July 12, citing sources.

*Mark Lewis, Barclays's head of European utilities equity research, believesthat the global fossil fuel industry is at the risk of losing $33 trillion inrevenue given more stringent government regulations and worldwide efforts tocut carbon emissions that would prompt companies to shy away from oil, naturalgas and coal, BloombergNews reports.

Commodities

*August crude oilfutures have fallen more than$6.00/bbl from their high in early June, and fresh data onso-called "smart money" positioning shows that more weakness ispotentially in store. Data from the "Commitments ofTraders" report published by the U.S. Commodity Futures Trading Commissionon July 8 showed that managed money traders liquidated 7,246 contracts from theirnet long position to reach 145,365 contracts in the week ended July 5.

*After shedding 9.9 cents in the week's opening session to a settle at$2.702/MMBtu, August natural gas futures renewed gains overnight ahead of the Tuesday, July 12,open, as market focus reverted from still-robust inventories to ongoing weathersupport and a steady erosion of storage surpluses that implied a tightening ofthe supply/demand balance. The contract was last seen 4.9 cents higher at$2.751/MMBtu.

*Next-day power values could bemixed Tuesday, July 12, as diverging demand forecasts for midweekcollide with the recent volatility in trading activity at the natural gasfutures arena. Losing 9.9 cents in the prior session, front-month Augustnatural gas futures were up overnight ahead of the market open Tuesday, tradingnear $2.746/MMBtu, up 4.4 cents on short-covering inspired by warmer weatheroutlooks that are seen driving up demand.

*Term packages for August delivery moved mixed to predominantly higher during the week ended July8 as gains at most hubs were encouraged by prospects of increased coolingdemand driven by summer weather and rising fueling costs implied by an uptickin the natural gas futures arena.

New from RRA

*On July 8, certainparties filedcomments in a proceeding in which electric industry stakeholdersare addressing policies that could be adopted by the Missouri Public ServiceCommission to "improve the way in which the Commission regulatesMissouri's investor-owned electric utilities."

Quoted

"Thisacquisition continues on the trend of the large-cap regulated utilitiesutilizing their significant cost of capital advantage to acquire'regulated-type' assets from distressed sellers," Jefferies analystAnthony Crowdell saidregarding Southern Co.'s purchase of a stake in Kinder Morgan Inc.'s SouthernNatural Gas Co. LLC.

The day ahead

*Early morning futures indicators pointed to a higher opening for the U.S.equity markets. To view more SNL equity market indexes, click here.To view more SNL Energy commodities prices, click here.