Williams continues to part with assets, considers selling still others

Aug. 20, 2002
Williams Cos. Inc. is continuing to divest itself of certain assets in an effort to shore up its balance sheet.

By OGJ editors

HOUSTON, Aug. 20 -- Williams Cos. Inc. is continuing to divest itself of certain assets in an effort to shore up its balance sheet. Earlier this month, the Tulsa-based energy company announced a plan to resolve some of its liquidity problems (OGJ Online, Aug. 13, 2002).

Included in these transactions are:

-- A subsidiary of Russian firm OAO Yukos has signed an agreement to purchase Williams's 26.85% equity interest in Lithuanian oil refining and transportation company AB Mazeikiu Nafta for $85 million.

-- Williams's general partner interest in Northern Border Partners LP (NBP) has been sold to a unit of TransCanada PipeLines Ltd., Calgary, for $12 million.

-- Williams is considering the sale of its ownership interest in an olefins production plant in Geismar, La., and an associated ethylene pipeline system in Louisiana.

Yukos acquisition
Yukos's purchase of Mazeikiu Nafta also will include the transfer of management rights for the complex. The government of Lithuania, however, has retained the option to purchase one half of Williams's shares within 30 days of the agreement, Williams told OGJ. The Yukos deal, which is also subject to the preliminary approval of Russian antimonopoly authorities, is expected to close by the end of September.

Mazeikiu Nafta was founded in 1998 following the merger of Mazeikiu Oil Refinery, Butinge Oil Terminal, and Birzai Oil Pipeline. Williams became manager of the company in October 1999, with a 33% interest. Yukos purchased a 26.85% equity share in the company earlier this year, redistributing ownership: Williams held 26.85% and the government of Lithuania, a majority 40.66% interest (OGJ Online, Apr. 22, 2002).

"As indicated at the time of Yukos's purchase of its initial stake in Mazeikiu Nafta in June, Yukos is making a commitment to Lithuania, and this transaction is further evidence of that commitment," said Mikhail Brudno, first vice-president of Yukos RM.

"The sale of Williams's stake in Mazeikiu Nafta is part of our near-term strategy to concentrate on our core business and deliver a higher percentage of cash earnings, strengthening its financial condition and providing a solid base for the company to move forward," said Randy Majors, managing director of Williams International.

Northern Border sale
NBP holds 70% interest in Northern Border Pipeline Co.—a 1,249 mile interstate system that transports natural gas from the Montana-Saskatchewan border to the US Midwest. The remaining interest is held by TC PipeLines LP. TC PipeLines's general partner is a wholly owned unit of TransCanada.

Williams's interests in its other natural gas pipelines are not involved in this sale, it said, although it is considering the sale of its Central Pipeline Corp.

As a result of this transaction, TransCanada said it would effectively hold 0.35% of the aggregate 2% general partnership interest in NBP, giving TransCanada entitlement to a 17.5% vote on NBP's partnership policy committee. The remaining interests in NBP's general partnership are held by Enron Corp., Houston.

Potential divestiture
Although the terms of a potential sale of its olefins plant and associated pipeline have not been defined, Williams said it "has received unsolicited expressions of interest." Williams holds 41.67% interest in and operates the facilities. BASF Corp. and GE Petrochemicals hold the remaining interests.

The plant has a production capacity of 1.35 billion lb/year of ethylene and is tied to many major natural gas liquids producers and olefin consumers in Louisiana by a 215 mile ethane transportation pipeline and an 85 mile ethylene line.

The company said, "The decision to consider a sale of these assets is part of the company's ongoing plan to strengthening its financial flexibility."

Phil Wright, president and CEO of Williams's energy services unit, said, "Our petrochemical segment has been a positive contributor to Williams's bottom line, even when other ethylene producers are struggling in current market conditions. We prefer to retain our ethane pipeline and storage system in Louisiana because it supports our deepwater Gulf Coast strategy, but we are willing to gauge the market value of our other olefins interests to see if we have a genuine opportunity to enhance our cash position."