Williams, Williams Partners Announce Strategic Restructuring to Drive Growth, Value

Williams and Williams Partners L.P. announced that Williams plans to contribute its gas pipeline and domestic midstream businesses plus its limited- and general-partner interests in Williams Pipeline Partners L.P. into Williams Partners. The partnership-transforming restructuring is valued at approximately $12 billion.

The restructuring transactions have been approved by Williams' Board of Directors and the Board of Directors of the general partner of Williams Partners. The Board of Directors of the general partner of Williams Partners acted upon the recommendation of its independent Conflicts Committee.

The restructuring is intended to drive additional growth and value for Williams' shareholders and Williams Partners' unitholders. The moves will result in two well-capitalized entities that are better positioned to pursue value-adding growth strategies; both expect to have investment-grade credit ratings.   

Following the closing of the asset contribution transactions, Williams Partners intends to make an exchange offer for the publicly held units of Williams Pipeline Partners.

"The goal of this strategic restructuring is simple: drive more value-creating growth across our natural gas businesses," said Steve Malcolm, chairman, president and chief executive officer.

"As a large, diversified MLP with expected investment-grade credit ratings, Williams Partners will have significantly enhanced access to capital sources. It will be able to self-fund our Gas Pipeline and Midstream growth--both organically and through third-party acquisitions,” he continued.

"With the partnership funding the gas pipeline and midstream businesses, we will have additional capital at the parent-company level to allocate to our exploration and production business," Malcolm said. "The result is a structure that will deliver the most value to Williams' shareholders and Williams Partners' unitholders.

"The enhanced opportunities for growth across all of our businesses will also help bolster the country's critically important natural gas infrastructure--from production and processing in key growth basins to end-user delivery," Malcolm said. "As the cleanest burning fossil fuel that is also abundant domestically, natural gas will play an important role in both creating jobs and securing the energy future of our country."

The gas pipeline assets Williams will contribute to Williams Partners include 100 percent of Transcontinental Gas Pipe Line Company, 65 percent of Northwest Pipeline, and 24.5 percent of Gulfstream Pipeline. Williams will also contribute its general-partner and limited-partner interests in Williams Pipeline Partners, which owns the remaining 35 percent of Northwest Pipeline.

The midstream assets Williams will contribute include its significant, large-scale operations in the Rocky Mountain and Gulf Coast regions, as well as its recently added business in Pennsylvania's Marcellus Shale. These assets encompass seven processing trains totaling 2.3 billion cubic feet per day (Bcfd) of capacity in the Rockies and four processing trains on the Gulf Coast. The Gulf Coast processing trains are integrated with five major deepwater oil and gas pipeline systems and two production handling platforms to serve producers in the deepwater Gulf of Mexico. 

The midstream assets will also include various equity investments in domestic processing and fractionation assets.

As consideration for the asset contributions, Williams will receive from Williams Partners cash proceeds of approximately $3.5 billion, less Williams Partners' transaction fees and expenses, plus 203 million Williams Partners limited-partner units, and will maintain its 2-percent general-partner interest. Williams Partners also will assume approximately $2 billion of existing debt associated with the gas pipeline assets.   

This transaction is expected to be immediately accretive to Williams Partners' distributable cash flow per L.P. unit and is expected to have no material effect on Williams' previous 2009-11 guidance for recurring earnings or cash flows. Williams expects this restructuring will increase recurring earnings and cash flow in the future as it will be able to pursue a greater number of investment and growth opportunities.

Once the transactions are complete, Williams Partners will be a leading diversified master limited partnership. The more robust partnership, with expected investment-grade credit ratings, will be self-funding with its own retained cash flows and enhanced access to debt and MLP equity markets. 

The partnership will benefit from an asset portfolio that includes large-scale, stable interstate natural gas pipelines and a substantial suite of geographically diverse midstream assets.   This portfolio of best-in-class gas pipeline and midstream assets also includes a large number of attractive development projects and business opportunities. 

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