Tallgrass Energy Partners LP (NYSE: TEP) boosted its ownership interest in the Rockies Express pipeline in a dropdown acquisition from an affiliated company.
The Leawood, Kan.-based company said April 3 it acquired an additional 24.99% membership interest in Rockies Express Pipeline LLC (REX) from Tallgrass Development LP for $400 million in cash. The acquisition was effective March 31.
The 1,698-mile pipeline stretches from northwestern Colorado and Wyoming to eastern Ohio and boasts 1.8 billion cubic feet per day of long-haul design capacity. REX became fully operational in November 2009.
“We are pleased to acquire an additional interest in REX at a very attractive price and we expect the transaction to be immediately accretive to unitholders,” David G. Dehaemers Jr., Tallgrass president and CEO, said in a statement.
Dehaemers said he plans to recommend the board of directors of the company's general partner to increase its quarterly distributions for the second and third quarters of 2017.
Tallgrass Energy owns a 75% interest in REX (50% at Tallgrass Energy Partners and 25% at Tallgrass Development) and operates the pipeline, and Phillips 66 (NYSE: PSX) owns a 25% interest.
In addition, the company said Ultra Resources Inc. recently announced that the U.S. Bankruptcy Court confirmed its Chapter 11 reorganization plan, which contemplates payment of REX’s $150 million claim within three months after Ultra emerges from bankruptcy and no later than Oct. 30, 2017.
Ultra previously indicated it plans to emerge from bankruptcy during the month of April. TEP will receive its roughly 50% share of an expected about $150 million distribution from REX resulting from Ultra's settlement payment, the company said.
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