Cove Point gas storage facility being sold

Virginia company to pay $217 million in cash to Williams Cos. of Houston

August 02, 2002|By Kristine Henry | Kristine Henry,SUN STAFF

The financially troubled Williams Cos. Inc. said yesterday that it is selling the Cove Point liquefied natural gas storage facility in Calvert County that it bought two years ago. It is one of several assets the Houston-based company is unloading to help beef up its cash flow.

Dominion Resources Inc. will buy the facility for $217 million in cash in a deal that is expected to close in mid-September. The Richmond, Va.-based firm is an integrated electricity and natural gas company involved in everything from exploration and production to storage to distributing the gas to private homes and business.

"Gas storage is one of our core businesses and is very instrumental to our operation," said Dominion spokesman Mark G. Lazenby. "This represents some additional gas storage capability for us in a model location in Dominion's mid-Atlantic footprint."

The facility will provide 5 billion cubic feet of storage capacity and is linked by its own pipeline to the major mid-Atlantic gas transmission systems of Transcontinental Gas Pipeline, Columbia Gas Transmission and Dominion Transmission.

Williams bought the site in June 2000 for $150 million. The facility employs 25 people, and Dominion said there will be no layoffs. The company plans to add about 40 jobs by the spring.

The facility has all the customers, or subscribers, signed on that it can handle. Dominion plans to add an additional 2.5 billion cubic feet of storage capacity by 2004; that capacity also has subscribers lined up. The site receives gas through pipelines, but it could soon begin receiving tanker shipments at its terminal.

Those plans became an issue after the attacks of Sept. 11. Some officials and nearby residents said they feared that the tankers would be vulnerable to terrorists. But the Federal Energy Regulatory Commission sided with Williams and said the company had taken sufficient steps to ensure the facility's safety.

Tankers will be able to deliver liquefied natural gas as soon as two more permits are issued by the Maryland Department of the Environment, said Cindy Ivey, a Williams spokeswoman.

Williams lost $349 million in the second quarter, and its credit rating has taken a beating. Yesterday, it announced a series of transactions, including the Cove Point deal, that should bring it cash proceeds of $1.4 billion from asset sales and $2 billion in secured financing.

"The company's top priorities have been to improve our financial position and resolve regulatory issues facing the company," Steve Malcolm, Williams chairman and chief executive, said in a statement. "These significant financial achievements, combined with the progress that was announced last week on the regulatory front, demonstrate that we are gaining traction in our efforts to move forward on a stronger foundation."

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