Southern Company, the holding company of Alabama Power, has agreed to buy 50 percent of the Southern Natural Gas pipeline system from Kinder Morgan, Inc.
Southern Company will pay $1,47 billion in the deal.
Both companies said the deal is designed to advance both companies’ leadership in energy infrastructure.
Kinder Morgan will continue to operate the system. In addition, the agreement commits the companies to cooperatively pursue specific growth opportunities to develop natural gas infrastructure for the strategic venture.
Southern Natural Gas is a 7,600-mile pipeline system connecting natural gas supply basins in Texas, Louisiana, Mississippi, Alabama and the Gulf of Mexico to markets in Louisiana, Mississippi, Alabama, Florida, Georgia, South Carolina and Tennessee. SNG is a principal transporter of natural gas to Alabama, Georgia and South Carolina, which are part of one of the fastest-growing natural gas demand regions in the United States.
“This transaction is consistent with the infrastructure development strategy we have discussed for well over a year. 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,” said Southern Company Chairman, President and CEO Thomas A. Fanning. “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 Company has been a valued customer of SNG for many years and this agreement draws on the strengths of both companies,” said Norman G. Holmes, president of Kinder Morgan South Region Pipelines. “We are very pleased to deepen our relationship with them and excited about the growth opportunities this strategic relationship will provide.”
Steve Kean, Kinder Morgan president and chief executive officer, added, “We plan to use all of the proceeds from this transaction to reduce debt at KMI. This is another step towards achieving our stated goals of strengthening our balance sheet and positioning the company for long-term value creation.”
Inclusive of existing SNG debt, the transaction equates to an SNG total enterprise value of approximately $4.15 billion which implies a value of $1.47 billion for Southern Company’s 50 percent share of the equity interest. Southern Company expects to finance the initial purchase, as well as any related future growth opportunities in a credit-supportive manner.
The transaction is subject to the notification and clearance and reporting requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The companies expect to complete the transaction in the third quarter or early in the fourth quarter of 2016.