Inergy buys NY salt company for natural gas storage

In a release Monday, Kansas City-based propane retailer Inergy LP (Nasdaq: NRGY) said Midstream has signed a definitive agreement to buy 100 percent of the membership interests in US Salt. The transaction is expected to close by the end of August.
US Salt is based in Schuyler County, N.Y., between Inergy’s Stagecoach and Steuben County natural gas storage facilities. US Salt is one of five leading solution-mined salt manufacturers in the United States, Inergy said in the release. It produces and sells more than 300,000 tons of salt a year.
Solution mining is a process in which water is pumped into a mine to better extract the minerals sought, according to the Salt Institute’s Web site.
The solution mining process US Salt uses creates salt caverns that can be developed into usable natural gas storage capacity, Inergy said. Inergy estimated that the acquisition will give it access to at least 10 billion cubic feet of additional salt cavern storage capacity, which it can connect to its existing energy storage systems.
Inergy said that it expects to immediately start developing about 5 billion cubic feet of available salt cavern capacity in the US Salt property and that it expects the capacity to be operational in the fall of 2010.
Inergy said it expects to spend about $191 million to buy US Salt and develop the initial 5 billion cubic feet of storage. Inergy expects to generate earnings before interest, taxes, depreciation and amortization from the combined salt production and gas storage operations of about $28.5 million on a run rate basis by the end of fiscal 2010.
Inergy said it will finance the acquisition of US Salt with a combination of borrowings from its revolving credit facility and Inergy LP common shares issued directly to the seller.
Inergy spokesman Mike Campbell said that all of US Salt’s roughly 130 employees will transfer to Inergy and that US Salt’s management team will relocate to Inergy’s Kansas City office.