09/22/2014 03:38 EDT | Updated 11/22/2014 05:59 EST

Veresen buys stake in U.S. natural gas pipeline system for US$1.425 billion

CALGARY - Veresen Inc. (TSX:VSN) is spending more than US$1.4 billion to buy a stake in a U.S. pipeline, a deal it says will bolster the company's plans to ship liquefied natural gas from a proposed terminal on the Oregon coast.

The Calgary-based company on Monday announced a deal to buy a 50 per cent stake in the Ruby pipeline system from Global Infrastructure Partners. The other 50 per cent of Ruby is owned by an affiliate of Kinder Morgan Inc., which will continue to operate the pipeline.

The line runs nearly 1,100 kilometres from Opal, Wyo. to Malin, Ore., in the centre of the state near the California border. From there, Ruby can connect to another planned pipeline, 50 per cent owned by Veresen, that would run to the site of its proposed Jordan Cove liquefied natural gas terminal on the coast.

Ruby, which just started up three years ago, currently ships about 1.5 billion cubic feet per day of gas, but that has the potential to be expanded to two bcf/d.

"This is the largest acquisition in Veresen's history and I'm excited about its positive impacts on Veresen today and Ruby's significant future growth potential down the road," CEO Don Althoff told analysts and reporters on a conference call.

"This transaction gives Veresen a rare opportunity to acquire a large interest in a long haul natural gas pipeline with strong market fundamentals and opportunities like this don't come along very often."

Althoff said Ruby would be an attractive investment in and of itself, but its fit with Jordan Cove makes the deal even more valuable to Veresen.

The deal is expected to close during the fourth quarter of this year and requires approval by the Committee on Foreign Investment in the United States.

Althoff said he doesn't expect the Ruby deal to change the proportion of gas Jordan Cove receives from gas fields in the U.S. Rockies versus Western Canada. In the end, he said, that's up to the pipeline's customers.

One advantage of the deal is that it would give Veresen insight into how the natural gas market in the U.S. Rockies operates, opening up more potential opportunities down the road, he said.

Veresen is involved in the pipeline, gas processing and power business. It also has a 50 per cent interest in the Alliance pipeline, a key piece of infrastructure that connects gas from northeastern British Columbia and northwestern Alberta to the Chicago area.

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