Under the terms of the deal with Spectra Energy Partners, Spectra Energy transfer redemption and cancellation 21,560,000 limited partner (LP) units, 440,000 general partner (GP) units, and a reduce distribution right payments associated with the cancelled units.
Spectra Energy Partners will also be provided with grant of a three-year, $4m per calendar quarter giveback of distributions from Spectra Energy on its incentive distribution rights (IDRs).
Spectra Energy Partners and Spectra Energy chairman and CEO Greg Ebel said: "The transaction between Spectra Energy and Spectra Energy Partners allows SEP to realize consistent distributable cash flow per unit and enhanced distribution coverage as a result of the redemption of units and the IDR giveback."
The acquisition is a part of an agreement signed earlier by Spectra Energy to contribute its interests in the Sand Hills and Southern Hills pipelines to DCP Midstream, a 50-50 joint venture between Spectra Energy and Phillips 66.
Phillips 66 is expected to contribute $1.5bn in cash to DCP Midstream.
The contribution of assets is expected to strengthen DCP Midstream with a stronger balance sheet and increased financial flexibility.
DCP Midstream earlier said that the deal contributes to its plan to reduce operating costs, sell certain non-core assets, and convert certain contracts from commodity price sensitive to fee-based.
The two transactions, which are subject to customary closing conditions, are planned to be completed in the fourth quarter.
The 720-mile long Sand Hills pipeline is designed to supply NGLs produced in the Permian Basin and Eagle Ford Shale, while the 800-mile long Southern Hills pipeline will transmit NGLs produced in the Midcontinent.
Image: DCP Midstream plans to reduce operating costs and sell certain non-core assets. Photo: courtesy of supakitmod / FreeDigitalPhotos.net.
