Sempra US Gas & Power, a unit of Sempra Energy, has signed an agreement to sell its 25% interest in the Rockies Express Pipeline (REX) in the US to a subsidiary of Tallgrass Development for $440m.
The company proposes to release the remaining uncontracted capacity on REX permanently, which is expected to result in a charge to earnings of between $100m and $120m during the second quarter of 2016.
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Sempra US Gas & Power president Patti Wagner said: "After careful evaluation of our natural gas portfolio, we determined that our minority stake in REX is not consistent with our long-term growth strategy.
"While REX is an important part of the country’s natural gas pipeline system, we believe that given the changing market conditions, we can more productively redeploy the proceeds from the REX sale into long-term growth opportunities that better meet our strategy and risk profile."
Sempra Energy executive vice-president Joseph Householder said: "While Sempra Energy’s earnings from REX for March through December 2016 will be reduced by approximately $60m, forecasted earnings from REX were expected to be immaterial to Sempra Energy beginning in 2020."
The 1,712-mile REX is operated by Rockies Express Pipeline, a joint venture of a subsidiary of Tallgrass Development, Sempra US Gas & Power and a subsidiary of Phillips 66.
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By GlobalDataIt extends from Opal, Wyoming, and Meeker, Colorado, to Clarington, Ohio in the US.
REX, which became fully operational in November 2009, has 1.8 billion ft³ per day of long-haul design capacity.
The transaction is subject to customary closing conditions and is expected to be completed in the second quarter of 2016.
