Merchant Energy Holdings, LLC, a Quantum Energy Partners portfolio company, announced that it has arranged for debt financing from Macquarie Group ( ASX : MQG ) (ADR:MQBKY), through its subsidiary Macquarie Bank Limited.

The financing is structured as a 5-year, $62 million Term Loan. Loan proceeds will be used to fund the Phase 2 expansion of MEH's wholly-owned subsidiary, East Cheyenne Gas Storage, LLC ("ECGS"), a FERC-certificated natural gas storage facility located in Logan County, Colorado. Quantum Energy Partners formed Merchant Energy Holdings for the purpose of developing underground natural gas storage facilities in the United States.

ECGS initiated construction on the Phase 1 project facilities in June 2011, commenced injection of base gas in November 2011, and completed withdrawal facility construction in the first quarter of 2012. The facility currently offers a full range of storage services as provided in its FERC-approved tariff. ECGS' facilities are currently interconnected with the Trailblazer pipeline system, which can provide firm access to the Cheyenne Hub for injection and withdrawal. ECGS is evaluating additional pipeline interconnects with Rockies Express, KMIGT, CIG, Southern Star and Cheyenne Plains. The Phase 2 expansion of ECGS is expected to be completed by 2014 and will include the installation of additional compression, dehydration, injection / withdrawal wells and liquids handling facilities.

"We are pleased to announce that we have begun construction of our Phase 2 expansion on this much-needed project and are excited to see its continued development," said Andy Lang, President, MEH. "We have been very pleased with the performance of the reservoir and are ahead of schedule for its planned expansion. The development team has done an excellent job in getting the project to this stage. With our partner, Quantum Energy Partners, we are positioned to promptly deliver services that will support the infrastructure needs of the region. With the future development of the adjacent Lewis Creek field, ECGS will be able to add additional high deliverability capacity and meet the growing needs for storage in the Front Range market and at the Cheyenne Hub."

It is anticipated that ECGS will have approximately 8 BCF of working gas capacity available for the 2013 storage season. The Phase 2 capital investment will ultimately support the development of up to 14 BCF of working gas capacity at the West Peetz storage reservoir and an increase in injection and withdrawal capability to 230,000 Dth/Day.