Dynegy Inc., Houston, signed a definitive agreement to sell its midstream natural gas business for nearly $2.5 billion cash to Targa Resources Inc., a Houston midstream company affiliated with private equity investor Warburg Pincus LLC.
The proposed sale involves Dynegy Midstream Services LP, which includes the company’s natural gas gathering and processing facilities, along with Dynegy’s NGL fractionation, terminal, storage, transportation, distribution, and marketing assets.
The properties, in West Texas, southeastern New Mexico, North Texas, and on the Texas and Louisiana Gulf Coast, include 9,300 miles of gas gathering pipelines and 11 operated gas plants. They also include interests in six nonoperated gas plants, three stand-alone fractionation facilities and strategic storage, transportation, and terminal facilities. Dynegy Midstream also owns or controls NGL transportation and logistics assets throughout the US.
Targa has midstream operations in West Texas and southwestern Louisiana, operating more than 2,000 miles of pipeline and five gas plants with capacity of 400 MMcfd of gas and throughput of 370 MMcfd. Targa also owns 40% of the Bridgeline pipeline system in southern Louisiana.
Warburg Pincus and current managers formed Targa in 2003 to acquire gas gathering, processing, and pipeline assets. Targa’s managers have experience with Tejas Gas Corp., Coral Energy/Tejas Energy LLC, Coastal Field Services Co., PG&E Gas Transmission Co., and US Generating Co.
Targa’s acquisition of Dynegy will involve $2.475 billion in cash, with $2.35 billion to be paid at closing, which is expected in the fourth quarter. Within 60 days of closing, Dynegy also will realize a return of cash collateral of $125 million and elimination of responsibility for $75 million in letters of credit for its midstream business. The boards of both companies approved the agreement. ✦