Duke buys small stake in Sabal Trail gas pipeline

OREANDA-NEWS. Duke Energy has bought a 7.5pc interest in the proposed \$3bn Sabal Trail natural gas pipeline that will supply the growing market for gas in Alabama, Georgia and Florida.

Duke's commercial power business, separate from Duke's regulated utilities, will invest \$225mn in the 500-mile (800km) pipeline designed to carry 1.1 Bcf/d (31mn m?/d) of gas from Williams' Transcontinental (Transco) pipeline in Alabama to Osceola County in central Florida. The first phase of the line is expected to begin service in mid-2017.

Duke acquired its 7.5 stake in Sabal Trail from Spectra Energy, which now holds a 59.5pc ownership. NextEra Energy holds 33pc.

Duke Energy Florida and NextEra's Florida Power & Light (FP&L) will be Sabal Trail's largest customers with 25-year capacity contracts. Duke's Florida utility has contracted for up to 391mn cf/d of firm capacity. FP&L has contracted for up to 400mn cf/d of firm transportation, with an option for an addtional 200mn cf/d by 2020.

Gas is used to produce more than 60pc of electricity in Florida, an amount projected to increase as Florida utilities replace capacity from coal-fired plants, a shuttered nuclear unit and older gas plants with larger, more-efficient combined-cycle gas generation.

Florida peak assessments average \$40/MWh for calendar-2016 and shed 2pc by 2021.

The investment in a third pipeline serving Florida "further expands the company's commitment to build critical natural gas pipeline infrastructure in the Southeast US, where natural gas has become an important fuel that provides significant environmental benefits," Duke vice president of commercial transmission Phil Grigsby said.

Gas from Sabal Trail will supply Duke's 1,640MW plant in Citrus County, which is scheduled to begin operating in 2018.

NextEra Energy is building the 126-mile Florida Southeast Connection, a \$550mn line to bring gas from Sabal Trail's central Florida hub to FP&L's Martin County gas plant.

Transco is planning to expand its Hillabee extension in Alabama to supply Sabal Trail. The expansion is planned in three phases. The first phase would provide 790mn cf/d of additional capacity to Sabal Trail by May 2017. The second phase would add 200mn cf/d by May 2020 and then the final 103mn cf/d in May 2021.

Duke ownership stake in the pipeline will not affect electricity rates paid by customers Duke Energy Florida or other Duke utilities.