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Rebuilt FERC to aid midstream credit health, but delayed projects to take toll

The restored voting quorum at the Federal Energy Regulatory Commission is positive for the credit health of the midstream sector, but some natural gas pipeline companies will still feel financial effects from project delays.

"While not necessarily an immediate credit issue, project delays caused by the lack of a FERC quorum could have had a potential negative impact on project returns and capital spending budgets, as well as raising questions surrounding potential loss of customers due to contractual agreement," analysts at Fitch Ratings said in an Aug. 8 note to clients.

Late on Aug. 3, the U.S. Senate voted to approve Republicans Robert Powelson and Neil Chatterjee and bring the five-seat commission to three members, the minimum number of commissioners required to issue certificates for gas infrastructure projects and vote on other major business.

Companies developing the 1.5-Bcf/d Nexus Gas Partners LLC pipeline project across the Midwest and the 1.1-MMDth/d PennEast pipeline between Pennsylvania and New Jersey, however, may face additional repercussions.

"Of the five shovel-ready natural gas pipeline projects with in-service dates of 2018 and 2019 awaiting FERC approval, all but the Nexus and Penn East pipelines are likely to maintain their originally intended completion dates," Moody's analysts wrote in an Aug. 7 research note. "Although these delays will result in lower 2017 cash flow generation for these pipeline owners, the FERC quorum makes it more likely that the projects will achieve their revised start dates and financial guidance."

Nexus owners DTE Energy Co. and Enbridge Inc. had to push the pipeline's start date to 2018. PennEast developers including Enbridge and New Jersey Resources Corp. have also seen delays that they attribute in part to FERC.