Under the terms of the sale, the Corporation received a cash payment of $85 million and Kineticor assumed ownership of the cogeneration units which are currently onsite. In conjunction with the divestiture, the Corporation entered into a long-term energy services agreement whereby Kineticor will supply power to Tidewater’s Pipestone Gas Plant once construction is complete in exchange for fixed energy fee payments. The Corporation also entered into an operating agreement, whereby Tidewater will manage the final construction of the cogeneration units and the day-to-day operations once in service. This will ensure that the cogeneration units, which will be highly integrated with the Pipestone Gas Plant, will be managed safely and efficiently for both Kineticor and Tidewater. The sale of the cogeneration units was contemplated in the original Pipestone Gas Plant economics and Tidewater’s previous guidance of $30 to $35 million of Adjusted EBITDA contribution from the project is unchanged given Tidewater’s progress in contracting volumes at the plant. Expected Adjusted EBITDA contribution is based on approximately 100 MMcf/day of contracted volume at market rates.
Tidewater has received significant customer interest for additional sour gas processing, natural gas storage and liquids handling capacity at Pipestone. As a result, Tidewater plans to utilize a portion of the proceeds from the sale of the cogeneration units to begin scoping these future expansions which are subject to final investment decision. The remaining proceeds from the sale will be used to fund Tidewater’s ongoing growth capital program through 2019. The Pipestone Gas Plant remains on budget and is expected to be commissioned in the third quarter of 2019.
Source: Company Press Release
