Crestwood takes $120M hit to lure suitors for pipeline joint venture with ConEd

Crestwood Equity Partners LP took a $120 million impairment during the first quarter on its Stagecoach Pipeline & Storage Co. LLC joint venture with Consolidated Edison Inc. to make the company more attractive to potential buyers, executives said.

"We had an indication that the market value of Stagecoach's assets was below its carrying value," Executive Vice President Steven Dougherty said during an April 27 conference call. "We also had a very comparable transaction announced in a similar time frame with the Natural Gas Pipeline Co. of America LLC trade, coming in at the 11x to 12x range, which was kind of also in the ZIP code of how we assessed fair value."

After Kinder Morgan Inc. and Brookfield Infrastructure Partners LP agreed in February to farm out a 25% stake in the natural gas pipeline system to a fund managed by ArcLight Capital Partners LLC, Crestwood now values its 50% share in Stagecoach at $666 million.

Crestwood Chairman, President and CEO Robert Phillips also told investors that interest in Stagecoach from potential buyers has been strong.

"We just recently got really into the meat of the process with the various participants, many of which have been conducting relatively extended due diligence," Phillips said during the call.

Analysts at Raymond James & Associates Inc. wrote in an April 27 note to clients that while "precedent transactions value [Crestwood's] stake at around $665 million," there is still a concern that the midstream operator could use its "newfound financial flexibility to pay a double-digit multiple to acquire ConEd's 50% stake."

The utility bought its Stagecoach share in 2016 for $975 million, according to an April 27 CreditSights note.

ConEd in 2020 said it would consider monetizing that asset as part of the company's plans to stop investing in long-haul gas pipelines.

The utility also owns a 12.5% stake in the Equitrans Midstream Corp.-led Mountain Valley Pipeline LLC project that expects to begin service in late 2021 but capped its cash contributions to the joint venture handling construction to about $530 million.