Regency Clinches Financing for Haynesville Shale Pipeline Project

Haynesville/Bossier Shale Play
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Regency Energy Partners LP, Alinda Capital Partners LLC and an affiliate of GE Energy Financial Services announced they are forming a joint venture to finance and construct Regency's Haynesville Expansion Project, a North Louisiana pipeline that will transport gas from the Haynesville Shale, one of the fastest growing U.S. natural gas fields. Regency has already secured commitments from shippers for 84% of the pipeline's capacity.

The initial 1.1 Bcf/d Haynesville Expansion Project will more than double Regency's pipeline system in North Louisiana and is expected to be in-service by the end of 2009. Regency will continue to develop and operate the system through the new joint venture.

Regency will contribute to the joint venture its Regency Intrastate Gas System ("RIGS") in North Louisiana, valued at $400 million, in exchange for a 38% general partnership interest in the joint venture. GE Energy Financial Services and Alinda Capital Partners LLC, an independent private investment firm specializing in infrastructure investments, have agreed to contribute $126.5 million and $526.5 million in cash, to the joint venture in return for a 12% and a 50% general partnership interest, respectively. Regency will receive a cash payment equal to the total Haynesville Expansion Project capital expenditures paid through the closing date, subject to certain adjustments.

"By partnering with GE Energy Financial Services and Alinda, we have secured financing for the Haynesville Expansion Project under terms accretive to our unitholders," said Byron Kelley, chairman, president and chief executive officer of Regency. "The positive liquidity created for Regency will allow us to maintain our current distribution level during construction."

"This joint venture deleverages Regency's balance sheet, providing us with sufficient liquidity to execute our business plan in 2009. Any capital markets activity would be completed when the financial conditions of the markets improve in order to further strengthen our financial position or to finance unidentified attractive growth projects. In addition, the joint venture provides a strong platform for further infrastructure development in one of the most attractive shale plays in the United States," said Kelley.

As Regency's general partner and a key player in the energy industry, GE Energy Financial Services, a unit of GE partnered with Regency to raise new capital for the Haynesville Expansion Project despite difficult credit conditions.

"Creating a joint venture, providing additional capital and bringing in a sophisticated partner in Alinda, GE is supporting Regency's growth and strengthening the project," said Dan Castagnola, managing director at GE Energy Financial Services and a member of Regency's Board of Directors. "In addition, this project will improve the overall energy security and independence of the United States by alleviating a transportation bottleneck experienced by many producers in the Haynesville area."

"We are pleased to join this partnership with Regency and GE Energy Financial Services -- two great leaders in the energy industry -- and look forward to a long-term, mutually beneficial relationship," said Chris Beale, managing partner of Alinda.

Regency expects to close the joint venture as promptly as practicable following the satisfaction of certain closing conditions but no later than April 30.

The parties will enter into an amended and restated general partnership agreement and a master services agreement, to define their rights, obligations and relationship. An affiliate of Regency will serve as the operator of the joint venture and an affiliate of Regency will provide all employees and services for the operation and management of the joint venture's assets. The oversight of the business and affairs of the joint venture will be managed by a management committee consisting of four members. Each member of the management committee will have a vote equal to the sharing ratio of the partner who appointed the member.

In addition, Regency will offer the joint venture the first option to acquire or pursue natural gas transportation and storage opportunities Regency identifies in Northern Louisiana.

As a condition to the closing of the joint venture, Regency is amending its revolving credit facility. Regency is also entering into a $45 million unsecured revolving credit facility with GE, the proceeds of which may be used to pay for expenditures relating to the Haynesville Expansion Project made prior to the closing of the joint venture. Tudor, Pickering, Holt & Co. Securities, Inc acted as the financial advisor to the conflicts committee of Regency's general partner.

The Haynesville Expansion Project consists of the construction of a 28-mile, 36" Bienville Loop, a 23-mile, 36" Elm Grove Pipeline and a 77-mile, 42" Winnsboro Loop. Regency expects to expand the pipeline's interconnects with the Columbia Gulf, Texas Gas, Trunkline and ANR pipelines and expects to add 14,200 horsepower of compression at the Elm Grove and Haughton Stations. In addition, Regency expects to add 1.1 Bcf/d of capacity to the pipeline system.


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