|
Alaska partners ready for North Slope natural gas line Native corporations, Pacific Star Energy in line for 19.9 percent share Larry Persily Petroleum News Government Affairs Editor
The Alaska partners in MidAmerican Energy Holdings Co.’s bid to build and operate a North Slope natural gas pipeline say they intend to exercise their options to take a combined 19.9 percent ownership if the project moves forward.
“We will execute that option,” said Ken Thompson, president of Pacific Star Energy LLC, one of MidAmerican’s two partners in the project. Pacific Star is an Anchorage-based consortium of 12 of the state’s regional Native corporations.
The agreement gives Pacific Star Energy and Cook Inlet Region Inc., the Native regional corporation for Cook Inlet, the option to each take 9.95 percent ownership in the project. Des Moines, Iowa-based MidAmerican, controlled by Warren Buffet’s Berkshire Hathaway Inc., would hold 80.1 percent of the pipeline venture.
Until MidAmerican issues its first capital call, the Alaska partners’ investment is small. But if the Lower 48 pipeline operator proceeds with the project, estimated at $6.3 billion, the Alaska partners could be called on to contribute about $380 million to maintain their 19.9 percent share if the project goes ahead at 30 percent equity and 70 percent debt.
As part of the deal, MidAmerican is holding out the option for other investors to buy in at up to 5 percent, in which case CIRI and Pacific Star Energy would see their shares reduced to 7.45 percent each to make room. TransCanada could join partnership Thompson said one possibility is that TransCanada could take the full 5 percent option. The Calgary-based pipeline company is the likely candidate to build and operate the pipeline from the Alaska border, where MidAmerican’s ownership would end, to central Alberta, where the pipe would connect to the North America distribution grid. (See related story on page 4.)
In addition to its individual 9.95 percent option in the pipeline venture, CIRI is among the 12 corporations with a stake in Pacific Star Energy. The only one of Alaska’s 13 regional for-profit corporations not in the deal is Ahtna Inc., the Glennallen-based corporation for the Copper River basin, Thompson said.
The 12 corporations needed to sign on for $83,400 each, or $1 million total, to start up Pacific Star Energy last year and carry the business through the end of this year, Thompson said. “There may be additional investment in 2005.”
Until more money is needed, “we’re assisting MidAmerican with our knowledge,” said Thompson, a former president of ARCO Alaska Inc. In addition to the Native corporations, Thompson and his wife are shareholders in Pacific Star, through their company Pacific Rim Leadership Development LLC. No schedule announced for capital MidAmerican project leader Kirk Morgan declined to say when the company would issue its first capital call if it goes ahead with the Alaska gas project. Its application to the state for a fiscal contract for the project shows permit work starting the second half of 2004, detailed engineering starting the second quarter of 2005, construction in 2007 and full gas flow in 2010 at 4.5 billion cubic feet per day.
MidAmerican’s application under Alaska’s Stranded Gas Development Act allows the company to negotiate a fiscal contract with the state for a schedule of payments in lieu of perhaps uncertain state and municipal taxes over the life of the project. The application is not a commitment to build the line, but would set up the state and municipal payment plan if the company goes ahead with the investment.
The three major North Slope producers submitted their own Stranded Gas Act application to the state a couple of days before MidAmerican turned in its proposal last month, and state officials plan to start separate fiscal contract negotiations with both applicants this month. It likely will be up to MidAmerican and the producers, not the state, to decide which one goes ahead with the pipeline, or perhaps the companies might join forces for the project.
Thompson said Pacific Star Energy expects it could use its cash flow from the pipeline to build natural gas and gas liquids distribution centers in Alaska and perhaps spur pipelines to carry gas to Fairbanks and Anchorage. He said Pacific Star would look at such ventures on its own, separate from the MidAmerican partnership. Native corporation has cash to invest Cook Inlet Region Inc. said it decided to invest for the expected profits and to give Alaskans an ownership stake in the gas line — something they don’t have in the trans-Alaska oil pipeline. CIRI already holds natural resource investments through its partnership with Nabors Industries in Peak Oilfield Service Co. and Alaska Interstate Construction LLC, which provide oil field, mining and construction services.
The Anchorage-based Native corporation has rung up impressive profits in recent years, totaling $723 million in net income between 1997 and 2002. In addition to its oil field and construction businesses, it also holds investments in Alaska tourism ventures, resort hotels in Arizona and Nevada, and wireless communications systems nationwide.
“CIRI’s recent financial performance has allowed it to accrue the funds needed to participate in the project independently,” said a prepared statement issued by the company.
| 