Buckeye Partners LP (BPL:US) agreed to buy Northern California storage caverns from closely held ArcLight Capital Partners LLC for about $440 million in a deal that will expand the U.S. fuel transporter into natural-gas handling.
The purchase includes 22 billion cubic feet of gas-storage capacity at facilities in Lodi, California, and about 45 miles to the west, Breinigsville, Pennsylvania-based Buckeye said today in a statement. ArcLight already had a proposal pending for an expansion of 12 billion cubic feet of new storage, which Buckeye said will cost about $40 million.
U.S. gas use is expected to rise 19 percent by 2020 as more of the fuel is burned in power plants in California and other states, according to an Energy Department projection. The California acquisition is ``a cautious first step'' to diversify amid calls by U.S. politicians to curb use of petroleum-based fuels, Buckeye spokesman Stephen R. Milbourne said.
Fees from the Lodi operation, which feeds Pacific Gas & Electric gas pipelines serving the San Francisco and Sacramento areas, will increase distributions to unit holders immediately upon closing, expected by the end of this year, Buckeye said. The purchase will be financed about half and half through sales of new equity and debt (BPL:US), the partnership said.
Units of Buckeye rose 51 cents, or 1 percent, to $53.81 in New York Stock Exchange composite trading.
ArcLight will get $428 million at closing and $12 million when the California Public Utilities Commission approves the expansion plan, Buckeye said.
Buckeye owns and operates 5,400 miles (8,689 kilometers) of petroleum-products pipelines and has 20 billion barrels of fuel storage in central and northeastern U.S. states, including Illinois and New York.
Lehman Brothers Holdings Inc. advised Buckeye on the purchase.
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