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DTE Energy expands pipeline unit with $2.25B gas network deal

DTE Energy’s midstream business said it would buy a natural gas gathering system and pipeline in Louisiana’s Haynesville shale formation for $2.25 billion in cash, expanding the unit’s operations to the Gulf coast.

DTE Midstream, which currently focuses on the Midwest and Northeast of the United States, will acquire M5 Louisiana Holdings from Momentum Midstream and Indigo Natural Resources, which is the main producer which feeds gas into the network.

The deal, which also includes a $400 million payment upon completion of a 150-mile gathering pipeline, currently under construction and due to enter service in the second half of 2020, will immediately add 15 cents to the company’s operating earnings per share in 2020, a company statement said.

“The assets are located in a great demand area, the quickly growing Gulf Coast natural gas market, with excellent access to other pipeline systems,” DTE Energy CEO Jerry Norcia told analysts on a call to discuss the acquisition.

DTE Energy’s shares closed 1.7% lower on Friday. The company said the acquisition would be paid for using an equal split of senior unsecured debt and mandatory convertible bonds.

The purchase forms part of DTE Energy’s plan to invest between $4 billion and $5 billion into its midstream unit between 2019 and 2023, the statement said.

DTE Energy has looked to expand into natural gas pipelines and storage, which provides steady cash flows even during energy price swings, at a time when advanced energy efficiency measures have made the provision of electricity less lucrative.

However, DTE Energy expects to retain a long-term business mix of which between 70% and 75% will consist of its utility operations, the statement added.

Reuters reported that DTE was nearing a deal to buy the gas pipeline system on Thursday, citing sources.

DTE Energy was advised by Barclays, with legal assistance from Shearman & Sterling and Dechert. Jefferies and Credit Suisse served as financial advisors to Momentum, with Vinson & Elkins as its legal counsel. Kirkland & Ellis was legal advisor to Indigo.

Reporting by Arundhati Sarkar in Bengaluru and David French in New York; Editing by Shailesh Kuber and Sonya Hepinstall


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