Dive Brief:
- Southern Co. is continuing to expand its natural gas reach, announcing this week it will purchase 50% of Kinder Morgan's Southern Natural Gas (SNG) pipeline system for $1.47 billion.
- A week prior, Southern announced it had completed the acquisition of gas utility AGL Resources, making it the second largest utility company in the United States.
- The SNG system stretches 7,600 miles throughout the Southeast. Kinder Morgan will continue to operate the pipeline system.
Dive Insight:
Southern Co. said its deal with Kinder Morgan will give customers more supply access and position the company for future growth: It would operate 11 regulated utilities providing service to approximately 9 million customers, making it the second-largest combined gas and power utility in the country.
"Our new ownership stake in SNG will position Southern Company for future growth opportunities and enhanced access to natural gas, which are expected to benefit customers and investors alike," Southern Chairman, President and CEO Thomas Fanning said in a statement. "The company's strategic venture with Kinder Morgan, combined with our recent additions, AGL Resources and PowerSecure, underscore Southern Company's leadership position in electricity and natural gas and our commitment to developing America's energy infrastructure."
Southern said the deal, inclusive of existing SNG debt, equates to an SNG total enterprise value of approximately $4.15 billion, with Southern's half of the system worth $1.47 billion. The company said it expects to finance the initial purchase, as well as any related future growth opportunities "in a credit-supportive manner."
The SNG system connects supply basins in Texas, Louisiana, Mississippi, Alabama and the Gulf of Mexico, to markets in Louisiana, Mississippi, Alabama, Florida, Georgia, South Carolina and Tennessee.
Southern and Kinder Morgan say they expect to close the deal later this year. The same will be subject to review under the Hart-Scott-Rodino Antitrust act.
Kinder Morgan President and CEO Steve Kean said the company plans to use all of the proceeds to reduce debt at the pipeline company. "This is another step towards achieving our stated goals of strengthening our balance sheet and positioning the company for long-term value creation," he said.
Before the acquisition was announced, Southern's system included nearly 200,000 miles of electric transmission and distribution lines and more than 80,000 miles of natural gas pipelines. The company also controls abut 44,000 MW of generating capacity.
