Spectra Energy Partners Earnings Call INSIGHTS: Great Gulfstream Opportunities, New Florida Project

On Thursday, Spectra Energy Partners, LP (NYSE:SEP) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Great Gulfstream Opportunities

Paul Jacob – Raymond James: Recognizing the fact that there’s a lot of gas fired power plants within your footprint on Gulfstream and East Tennessee natural gas, could you just give us some color surrounding the opportunity there and how that might play out over the next 12 to 24 months?

Julie Dill – President and CEO: Paul, on East Tennessee, we probably have a dozen or so power generation facilities within about 30 miles of that pipeline and those range from very small plants to larger plants as well. So we don’t necessarily think that we will have the opportunity to change all of those but we do think that there is a good opportunity as those companies look at what their EPA requirements might be, what the environmental requirements might be, and then of course the economics of converting to natural gas. So, we think that over time, we will have good opportunity off of the East Tennessee system. Off of Gulfstream, of course, Florida is a great market. The Southeast is really the highest demand growth market that we have in the U.S. and there is lots of plans that are being made to convert power plants and build power plants there in the Florida market and our Gulfstream asset is ideally suited to help provide capacity for that, although we do think by the time we see what might be required, an additional pipeline might be needed into that area. So, with the relationships we have being able to build up the existing footprint that we have, we think that we have a very high competitive advantage in regard to being able to bring gas to those gas-fired generation facilities there as well, but again these are going to be longer term, it’s probably 2014, ’15, ’16 kind of timeframe before some of that would eventuate.

Paul Jacob – Raymond James: Then relating to your gas storage at Moss Bluff and Egan, could you give us a sense for what the rate renewals might look like there and what customer retention looks like?

Julie Dill – President and CEO: Yes, one of the things that we like to talk about with both the Moss Bluff and the Egan facilities is that those are premier storage facilities here in the U.S., primarily because they are high deliverability storage. So, lots of flexibility there and really connected well into the system. We don’t talk about specific rates that we have for storage, but as we all know, storage pricing is a bit pressured right now because of the amount of gas that we have, but we have got about probably – we’re done with our contracting for this year. So, as we start moving into the latter part of this year and into the first quarter of next year, we’ll be looking to re-contract roughly a third of the capacity contracts that we have on the books. So, we’ll be looking at how the market is evolving over that period of time. Weather clearly is a big consideration for us and we’ll see if this overly warm weather continues through the balance of the year as we come back to more normal rates, but they’re great assets for us and we’ll just continue to watch the market closely to make sure that we’re taking the best advantage that we can and getting the best value that we can for those high value storage assets.

Paul Jacob – Raymond James: Then last question from me is more of a housekeeping item. When we’re modeling out maintenance CapEx recognizing that you had substantially more maintenance CapEx in this quarter than last quarter, in that $19 million range that you pointed to again, should I be looking at that just being evenly split over 3Q and 4Q or is there some sort of weight towards the back end of the year?

Laura Buss Sayavedra – VP and CFO: I think it’s a little bit different every year depending on the program, but I think if you look at it at about half and half, I think that’s a fair way to do it. Within the year, quarter-to-quarter predictions are always a little bit of a challenge, but we feel really good about where we are for our annual number. So I think that’s a fair way to look at it.

Julie Dill – President and CEO: Yeah, and some of it is just taking advantage of what the opportunities are, where the crews are, and how the weather is playing out and that’s actually why we, as Laura mentioned in her remarks, we were more heavily skewed in the first half because with the warmer weather we could get started sooner and make sure that we got everything done this year that we will require to do.

New Florida Project

Christopher Sighinolfi – UBS: I just want to follow on quickly some of those questions. With regard to Florida, I know it’s talked about, new pipe opportunities obviously with the economic situation, seems like that that maybe has been pushed off a little bit. A lot of people I think have focused on what FPL or NextEra might do after I guess some of the rate case decisions in the back half of the year, but what’s your expectation in terms of timing for any sort of project, new project to Florida?

Julie Dill – President and CEO: We’ve got – there’s a number of different generating facilities that are being looked at. So, if you just look at FPL’s modernization project, they’ve brought their third unit of the West County Energy Center online in June and they’re on schedule to have Canaveral in service by 2013. Their conversion at Riviera Beach is underway and that should be in service in 2014, and then of course they’ve just received their regulatory approval for a third modernization investment at Port Everglades, and that’s an expected in-service in 2016. So, there’s kind of a myriad of different facilities that are out there from an FPL perspective. I think you are exactly right. They’re getting through all of their regulatory rate hearings right now. We had said before that we expect that we should see an RFP from them by year-end. That’s been pushed off from years before, and it’s continued to push out. I don’t have any information that it would be pushed out any further. It could be, but again, some of it is demand related. Economy is a big driver on this as well. So we are just going to continue to see how all of this evolves. We talked to as well earlier in the year about kind of what the numbers overall for Florida were going to be and in July the council that puts numbers out for gas power generation updated some numbers and so over the next 10 years they believe that power demand is going to go up by about 9,000 megawatts and expected about 8,000 of that’s going to be gas fired addition. So there is going to be a need for additional capacity, it’s just a matter of timing on that.