Veresen Mulls Deals After U.S. Approval of LNG Terminal

Veresen Inc. (VSN), the Canadian company planning a liquefied natural gas terminal on the coast of Oregon, is considering acquisitions as the project’s approval and a share surge make funding deals easier.

The energy infrastructure company, based in Calgary, expects its 38 percent share price jump in the past six months will help secure financing for mergers and acquisitions as its Jordan Cove LNG project advances, Chief Executive Officer Don Althoff said in an interview. The U.S. Department of Energy last month gave the shipping terminal approval to export gas to countries that don’t have free trade agreements with the U.S.

Energy companies are vying to build coastal LNG plants to tap Asian gas prices that are about five times higher than in North America. The Jordan Cove approval is the seventh by President Barack Obama’s administration as Congress pushes for more energy exports amid sanctions against Russian President Vladimir Putin for the annexation of Crimea from Ukraine.

“Jordan Cove has opened doors for some M&A opportunities for us that we can look at today that weren’t available for us 12 months ago,” Althoff said by phone on April 11. “If I was going to do an M&A project, my ability to get a low cost of capital is important.”

The company could invest in assets it would operate or be a partner in, either tied to Jordan Cove or related to its existing midstream, gas pipeline and power business, Althoff said, declining to comment on specific talks. Veresen paid C$920 million ($837 million) for a gas processing and gathering complex from Encana Corp. in 2012, its biggest purchase.

Terminal Startup

Jordan Cove, scheduled to start up in 2019, may add C$5 to C$9 a share to Veresen’s stock if it’s built, Juan Plessis and Jared Alexander, analysts at Canaccord Genuity Corp. in Vancouver, wrote in an April 7 note. Veresen’s price surge since October reflects about C$2.75 of value that investors are already attributing to the project, according to the analysts.

The facility still requires state and local permits and approval by the Federal Energy Regulatory Commission, which is now conducting an environmental review. Veresen raised C$247.5 million in equity this month, partly to fund the project.

Veresen will face tough competition if it seeks midstream assets that are being sought after by peers for their high returns, said Steven Paget, an analyst at FirstEnergy Capital Corp. in Calgary.

“People want to buy midstream assets and that means they are not cheap,” Paget said.

To contact the reporters on this story: Rebecca Penty in Calgary at rpenty@bloomberg.net; Divya Balji in Toronto at dbalji1@bloomberg.net

To contact the editors responsible for this story: Susan Warren at susanwarren@bloomberg.net; Brad Skillman at bskillman1@bloomberg.net Carlos Caminada, Robin Saponar

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