Italy's Snam seeks U.S. footprint with bid for Midwest gas pipeline - sources

Ztest Electronics

06/09/2019 20:56

By Stephen Jewkes, Pamela Barbaglia and David French
    MILAN/LONDON/NEW YORK, Sept 6 (Reuters) - Italy's Snam
 SRG.MI  is working on a bid for a stake in a $6 billion natural
gas pipeline in the United States in what would be the gas
group's first foray outside Europe, four sources told Reuters.
    The Milan-based company, controlled by state lender Cassa
Depositi e Prestiti, is carrying out due diligence to buy a 33%
stake sold by Energy Transfer LP  ET.N  in its Rover pipeline,
one of the sources said.
    The 713-mile Rover pipeline can carry 3.25 billion cubic
feet of gas daily from the Marcellus and Utica shale plays in
Appalachia.
    It is backed by Energy Transfer with a 33% stake and two
private equity firms - Energy & Minerals Group (EMG) and
Blackstone Group  BX.N  - who have the remaining 67%.
    Snam, Europe's biggest gas pipeline operator which makes
most of its money from gas transmission in Italy, is working
with JPMorgan on the deal, the sources said.
    Snam and JPMorgan declined to comment while Energy Transfer
was not immediately available for comment.
    Snam wants to build an international presence and sees
potential to grow in the United States which has seen a boom in
natural gas production as part of the shale revolution.
    Pipelines and other midstream infrastructure in the U.S.
have consistently drawn interest from private equity firms as
well as infrastructure and pension funds as they produce stable
returns.
    Additionally, returns on pipeline investments in the United
States are generally higher than in Europe where many grids are
run with regulated tariffs.
    The Rover pipeline moves the natural gas from Ohio, West
Virginia and Pennsylvania to other parts of the U.S. Midwest and
up into Michigan where it can also be piped into Canada.
    The auction process for Energy Transfer's stake in Rover is
at an advanced stage, according to three sources, and other
bidders have also shown interest in the asset.
    Snam, led by Chief Executive Marco Alverà, may submit a
joint bid with some financial investors to boost its firepower,
one of the sources said.
    It previously teamed up with Abu Dhabi state investor
Mubadala and EIG Global Energy Partners to bid for Petrobas' TAG
gas pipeline in October but lost out to a consortium led by
France's Engie.  urn:newsml:reuters.com:*:nNRA90xczb
    The Italian company is also sounding out whether EMG and
Blackstone would be willing to sell their shares in the Rover
pipeline and cash out with Energy Transfer.
    Blackstone declined to comment while EMG was not immediately
available for comment.
    Snam, which also operates gas storage and liquefied natural
gas (LNG) assets, has previously said it is ready to monitor
opportunities in Italy and abroad that fit its investment
criteria.
    The company is playing a leading role in integrating
Europe's grids and is investing in the Trans Adriatic Pipeline
which will bring Azeri gas into Italy in 2020.
    Last year it led a consortium that bought a majority stake
in Greek gas grid operator DESFA.
    Snam generated revenues of 2.58 billion euros in 2018 and
had 1.4 billion euros of operating profits. 

 (Editing by Louise Heavens)
 ((stephen.jewkes@thomsonreuters.com; +39.0266129695; Reuters
Messaging: stephen.jewkes.thomsonreuters.com@reuters.net))