Rockies Express Holdings LLC, a wholly owned subsidiary of Tallgrass Development LP, has agreed to acquire the 25% interest in the Rockies Express Pipeline LLC belonging to Sempra US Gas & Power, a unit of Sempra Energy, for $440 million in cash.
As part of the deal, a subsidiary of Phillips 66 that holds 25% interest in REX has a right to purchase its proportionate share of Sempra’s 25% interest being sold to Tallgrass, which could reduce the membership interest acquired by Tallgrass from Sempra to 16.6%.
Tallgrass, a private limited partnership organized in Delaware, expects the deal to close in the second quarter. The company already operates and owns 50% interest in REX, a 1,712-mile natural gas pipeline that that extends from Opal, Wyo., and Meeker, Colo., to Clarington, Ohio.
Sempra expects the deal to result in an aftertax loss of $27 million. Sempra US Gas & Power also intends to permanently release the remaining uncontracted capacity that it holds on REX that it had been releasing on an interim basis.
“After careful evaluation of our natural gas portfolio, we determined that our minority stake in REX is not consistent with our long-term growth strategy,” explained Patti Wagner, president and chief executive officer of Sempra US Gas & Power.
“While REX is an important part of the country’s natural gas pipeline system, we believe that given the changing market conditions, we can more productively redeploy the proceeds from the REX sale into long-term growth opportunities that better meet our strategy and risk profile,” she said.