The Canada Pension Plan Investment Board (CPPIB) has agreed to form a US$3.8 billion joint venture with US midstream player Williams.
The joint venture will include Williams’ Ohio Valley Midstream and Utica East Ohio Midstream systems in the Appalachian Basin, which holds the Marcellus and Utica shale plays. The CPPIB will invest US$1.34 billion to acquire a 35% stake in the joint venture.
“This joint venture will provide CPPIB additional exposure to the attractive North American natural gas market, aligning with our growing focus on energy transition,” said the CPPIB’s managing director and head of energy and resources, Avik Dey.
“The joint venture complements our recent investment in Encino Acquisition Partners, an anchor customer on [the Utica East Ohio system] and other Williams gathering assets,” he continued. “Through these unique operations in highly attractive basins, we will further our strategy to establish US midstream exposure alongside highly regarded and experienced operating partners such as Williams.”
Concurrent with the agreement, Williams has acquired the remaining 38% that it did not already own in the Utica East Ohio system from Momentum Midstream, also taking over the operatorship of the asset. This transaction closed on March 18, the date the new joint venture was announced. Williams already owned 100% in the Ohio Valley system.
Williams said it anticipated achieving synergies by combining the Ohio Valley and Utica East Ohio systems to create a “more efficient platform for capital spending in the region. The company believes this will result in reduced operating and maintenance expenses, while also creating “enhanced capabilities and benefits” for producers in the region.
The ongoing drilling boom in the Utica and Marcellus plays – which together comprise the US’ most productive shale gas region – has led to midstream capacity constraints acting as a brake on Appalachian Basin growth. The CPPIB-Williams joint venture marks the latest in a series of multi-billion dollar deals involving investment funds aimed at alleviating these bottlenecks.
Last year, the CPPIB-backed Encino agreed to purchase Utica shale assets from Chesapeake Energy for around US$2 billion.
The CPPIB’s investment in the Williams joint venture is expected to close in the second or third quarter of 2019, subject to customary closing conditions.