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Essential Energy Insights - October 2021


Oct. 2-6: EPA to repeal Clean Power Plan; Sempra seeks Oncor deal approvals

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

Highs

SEMPRA/ONCORSempra Energy on Oct. 5 filed its plans to acquire Oncor Electric Delivery Co. LLC with the Federal Energy Regulatory Commission and the Public Utility Commission of Texas. San Diego-headquartered Sempra filed its merger applications roughly six weeks after it launched its $9.45 billion bid for the Texas transmission and distribution utility. Sempra also dropped plans for a third-party investor in the deal and said it will acquire all interests in Oncor's indirect parent company Energy Future Holdings Corp., or EFH. The U.S. Bankruptcy Court for the District of Delaware on Sept. 6 approved Sempra's agreement to acquire EFH and its equity interest in the ring-fenced electric utility.

TARGATarga Resources Corp. said Oct. 4 that it sold a 25% joint venture interest in its proposed Grand Prix NGLs pipeline to funds managed by Blackstone Energy Partners. Targa on Oct. 4 also announced that it will jointly develop the 1.9-Bcf/d Gulf Coast Express pipeline project with DCP Midstream LP and a subsidiary of Kinder Morgan Inc. Analysts said the ventures could help slow overbuilding in the Permian Basin. "We view the deals as a positive from an industry perspective as these [joint ventures] help to prevent the overbuilding that occurred in the past 'hot' basins such as the Eagle Ford and Haynesville," CreditSights analysts wrote in an Oct. 5 research report.

Between

CLEAN POWER PLAN — The U.S. Environmental Protection Agency plans to repeal the Clean Power Plan and will likely seek public input on its replacement. In a document obtained Oct. 6 by Politico, the EPA said it has now concluded that the rule must be repealed in its entirety. As expected, the agency determined that it lacked authority under the Clean Air Act to put the carbon-reduction regulations into effect.

ARMSTRONG — Armstrong Energy Inc. announced Oct. 5 that it reached an agreement in principle with major creditors that will allow for a comprehensive balance sheet restructuring. The coal producer said it expects to continue ordinary customer shipments and mining operations during the restructuring process. Armstrong also has filed a Form 15 with the SEC to immediately suspend certain reporting obligations. The company has missed interest payments and warned that it is likely to default on its debt with bankruptcy looming.

Lows

KENTUCKY POWERKentucky Attorney General Andy Beshear has urged state regulators to reject Kentucky Power Co.'s $60 million rate increase in its entirety. "It shouldn't be less, it should be zero," he said at an Oct. 4 press conference. The American Electric Power Co. Inc. subsidiary in June asked for a $65.4 million base rate increase but later cut the request to $60.4 million. Beshear called the request an "unnecessary toll on the wallets of eastern Kentucky families" and "another punch in the gut" to those living in an area dealing with economic hardships. Kentucky Power President Matt Satterwhite said the utility "obviously disagrees" with Beshear's comments. "The [attorney general's] position wrongly places the blame on a poor economy on an eastern Kentucky business. Kentucky Power is focused on the long-term strength of eastern Kentucky," Satterwhite said.

TRANSCANADA — TransCanada Corp. on Oct. 5 canceled its plans to build the Energy East and Eastern Mainline megaprojects "after careful review of changed circumstances." The move comes shortly after TransCanada requested a 30-day regulatory timeout for the two projects as Canada's National Energy Board introduced a broader scope of issues and environmental assessment factors. Industry groups said the decision to walk away from the projects, which have a carrying value of C$1.3 billion, casts doubt on Canada's ability to build new pipelines amid uncertainty over the nation's regulatory policies. Energy East would have linked the oil sands region of Alberta with a seaport in New Brunswick.