Williams Partners' Project Starts - Analyst Blog

Leading diversified master limited partnership (“MLP”), Williams Partners L.P. (WPZ) announced the start-up of the operations of the first phase of the Transco pipeline’s 85 North expansion project.

The project has been designed to supply 90,000 dekatherms of natural gas per day to the 740-megawatt electric power plant of Constellation Energy Group Inc. (CEG) in Tallapoosa County, Alabama. This required the addition of a combined 17,900 horsepower at the two existing Transco compressor facilities in Alabama.

The Phase II of the aforesaid project is expected to be operational by the summer of 2011 and will expand the pipeline’s capacity by an additional 218,500 dekatherms per day. The second stage of the project will provide gas to the new as well as existing electric power plants in North Carolina.

This part of the project will call for the addition of approximately 22 miles of 42-inch pipeline in Alabama, South Carolina and North Carolina along with a new 20,500 horsepower compressor center in South Carolina and updating several existing compressor stations. The estimated total expenditure of the project is about $241 million.

The 10,000-mile long Transco pipeline system transports natural gas to markets all over the northeastern and southeastern parts of United States. The current system capacity is estimated at approximately 8.6 billion cubic feet per day.

According to management, the project highlights the partnership’s unrelenting efforts to satisfy the customers’ increasing demand for electric power generation throughout the Southeast.

Tulsa, Oklahoma based Williams Partners is involved in gathering, transporting and processing of natural gas, as well as fractionating and storing of natural gas liquids (“NGLs”). Williams Companies Inc. (WMB) owns approximately 84% of Williams Partners, including the general-partner interest.

We are optimistic about the partnership’s geographically diverse suite of midstream and gas pipeline assets, considerable project backlog, leverage to positive NGL fundamentals as well as healthy distribution coverage, all leading to promising future growth.

However, in view of the low natural gas and oil prices and the outcome of the recent restructuring of Williams Partners, we hold on to the Neutral rating for a greater than six-month time frame. This is supported by our short term Zacks #3 Rank (‘Hold’).