PennEast pipeline owners write down investments

The companies behind the PennEast natural gas pipeline are writing off most of their investment in the project because of delays and permitting uncertainty, despite a win weeks ago in the US Supreme Court affirming its ability to condemn needed land.

Five companies each own 20pc of the pipeline. South Jersey Industries, New Jersey Resources, Southern Company and UGI since last week took combined $354mn pre-tax write-down on their investments. Enbridge has yet to record an impairment on the $116mn it had invested in the project as of last year, according to financial filings. Enbridge did not immediately respond to a request for comment.

The four companies taking investment write-downs say they still believe the 1 Bcf/d (28mn m³/d) pipeline should be completed and they remain committed. But executives at UGI, which is leading development, say uncertainty about when the project would be completed, and when federal regulators will act on its request to break the project into two phases, led it to write down its $93mn investment. UGI had invested $96mn in the project at the end of last September.

"The partnership still firmly believes that New Jersey needs another source of natural gas, but what is in question now is the timing," UGI natural gas executive vice president Robert Beard said today on an earnings call. "Even though we got what we consider to be a necessary ruling from the Supreme Court, there still remains quite a few hurdles from a regulatory standpoint."

A representative for PennEast did not respond to a request for comment.

The pipeline initially sought to begin service in 2017 but has been delayed due to permitting issues and opposition from New Jersey. The pipeline secured a legal victory on 29 June when the US Supreme Court overturned a ruling blocking it from condemning needed state-owned land in New Jersey. But the pipeline still lacks key permits, including in New Jersey where political leaders remain opposed to the project.

"We have got a lot of other tools in the toolkit, and we will not hesitate to use them," New Jersey governor Phil Murphy (D) said after the Supreme Court ruling.

New Jersey Resources, in its explanation today of the investment impairment, cited uncertainty around permitting and its evaluation of the "environmental and political climate as it relates to interstate pipeline development."

The company took a $92mn pre-tax impairment on its investment in the project, which was $96mn as of 30 September, according to financial filings.

By Chris Knight