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US price cuts to hit Prime Infrastructure
DANNY JOHN
June 16, 2010


PRIME INFRASTRUCTURE will suffer a big drop in revenue from one of its last major investments after the US federal energy regulator pushed through a new charging regime for one of the country's main gas supply pipelines.

Cuts in the prices being charged by the Natural Gas Pipeline Company will take effect on a staggered basis from November 1, with the first round involving a cut of 3 per cent. That will be followed by a 2 per cent cut from April 1 next year and a final cut of 3 per cent from July 1.

Prime, which was known as Babcock & Brown Infrastructure, owns 26.4 per cent of NGPL as part of a consortium. The pipeline company is a leading supplier of gas to Chicago.

Yesterday's announcement was the culmination of a seven-month-long review of NGPL's pricing structure by the US Federal Energy Regulatory Commission.

It was the first such move by the commission since 1996.

A preliminary agreement - first proposed at the end of April - prompted another of NGPL's minority shareholders, the US energy group Kinder Morgan, to cut the value of its investment by $US430 million ($500 million) as a consequence of the expected fall in future revenue.

Prime made no mention in a statement to the ASX yesterday of having to follow suit by taking a similar impairment charge, limiting itself to saying that the new pricing regime would have no effect on its 2010 full-year earnings forecast for NGPL.

Analysts have estimated that the new pricing agreement could cut as much as $US150 million from the gas company's service charges.