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Coal Conversion Supports New Gas Demand

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Enbridge (ENB) plans to expand the Eastern Tennessee Natural Gas (ETNG) pipeline to meet new power generation demand in the Southeast region. The project, the Tennessee Ridgeline Expansion, is an example of new domestic demand we anticipate for natural gas, in addition to LNG export growth.

Enbridge introduced the Tennessee Ridgeline Expansion as a secured project in its 1Q24 earnings materials. At an estimated cost of $1.1B, the project will support new demand from Kingston Fossil, a coal plant the Tennessee Valley Authority (TVA) is converting to use natural gas.Picture1-May-22-2024-11-57-47-4155-PM

In the ENB Financial Blueprint, East Daley Analytics estimates the expansion will generate ~US$160MM in annual EBITDA to Enbridge once in service, equal to a 6.9x build multiple.

The project includes 130 miles of 30-inch pipe looping, plus meter modifications and an 8 MW solar array to be installed behind the meter. The project will add 300 MMcf/d of firm capacity on ETNG to the Kingston plant in Morgan County, TN.

ETNG has filed with the Federal Energy Regulatory Commission (FERC) for a certificate to construct the project. The pipeline is seeking approval by November 1, 2024 to begin construction in 2025 and to start service by November 1, 2026.

Environmental groups including the Sierra Club and Appalachian Voices are opposing the ETNG project, challenging the market need in filings at FERC. The TVA has filed its own comments at FERC in support. The agency has entered a final environmental impact statement and a record of the decision to proceed with the Kingston plant conversion. In its letter to FERC, the TVA noted that the switch to gas would not be possible without the ETNG expansion.

East Daley expects to see more opportunities like Tennessee Ridgeline Expansion for midstream companies as switching from coal to gas continues. From 2012 to 2022, coal-fired generation by utilities has declined 45%, according to Energy Information Administration data (see figure). Between industrial reshoring, data center demand and coal-switching, the industry has ample opportunities to grow domestic demand. – Zach Krause Tickers: ENB.


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