Brookfield, Crestwood to acquire Tres Palacios

A Brookfield Infrastructure and Crestwood Midstream JV will acquire the Tres Palacios natural gas storage and pipeline facility for $130m.

Crestwood Equity Partners, the general partner of Crestwood Midstream Partners, will sell Tres Palacios Gas Storage, a natural gas storage and pipeline facility in Texas, for $130 million to Tres Palacios Holdings (TPH), a newly formed joint venture between Brookfield Infrastructure Partners and Crestwood Midstream, according to a statement.

Crestwood Midstream, a master limited partnership (MLP) that owns and operates midstream businesses in shale resource plays in the US, will own 50.01 percent of the joint venture and will operate Tres Palacios and its assets, Crestwood said. The MLP will initially finance its portion of the purchase price – $65 million – through a $1.0 billion revolving credit facility.

Toronto-based Brookfield declined to comment on the financing.

“We are pleased to announce this strategic partnership with Brookfield Infrastructure and the sale of Tres Palacios to TPH LLC,” said Robert Phillips, chairman, president and chief executive of Crestwood Equity.

“Tres Palacios will immediately benefit as a result of the new long-term contract with Brookfield Infrastructure that will substantially increase the utilization of its available storage capacity,” Phillips said.

As part of the transaction, Brookfield will enter into five-year, fixed-fee contracts with Tres Palacios that will provide the latter with incremental annual firm revenues of approximately $16 million per year, according to Crestwood.

The transaction, expected to close in early December, is an important next step in establishing Crestwood Equity as a pure-play general partner MLP, Phillips said. The MLP will use the proceeds from the sale to pay down debt.

The partnership with Brookfield, an owner and operator of infrastructure assets in the energy, utilities, transportation and communications sectors, also provides Crestwood Midstream with a strategic partner to pursue longer-term growth opportunities in the Gulf Coast region resulting from anticipated natural gas demand growth associated with LNG export facilities, exports to Mexico and local power generation and industrial markets, according to the statement.

Brookfield’s North American energy platform includes approximately 15,500 kilometres of natural gas transmission pipelines and 300 Bcf of natural gas storage, including the Lodi Natural Gas Storage facility in California, the Toronto fund manager announced it was acquiring for $105 million in August.

Earlier this month, Brookfield launched its communications platform with the acquisition of a 23 percent stake in TDF, the largest independent communication tower infrastructure business in France.

Based in Houston, Crestwood Midstream is a growth-oriented MLP which owns and operates predominantly fee-based gathering, processing, treating and compression assets servicing natural gas producers throughout the US.

Crestwood Equity, which owns the general partner interest, including the incentive distribution rights and an approximate 4 percent limited partner interest in Crestwood Midstream, also has a natural gas liquids supply and logistics business that serves customers in the US and Canada.