Georgia-based power generator Southern Co. has expanded its footprint into gas production with the acquisition of a 50% stake in Houston-based Kinder Morgan Inc.’s Southern Natural Gas pipeline system.
Bloomberg reports the deal has an implied value of $1.5 billion, based on a debt inclusive total enterprise value of approximately $4.2 billion for the pipeline system.
SNG is a 7,600-mile system connecting gas fields in Louisiana, Mississippi, Alabama, Texas and the Gulf of Mexico to markets in the Southeast United States.
“This transaction is consistent with the infrastructure development strategy we have discussed for well over a year,” says Southern Co. Chairman, President and CEO Thomas A. Fanning. “Our new ownership stake in SNG will position Southern Co. for future growth opportunities and enhanced access to natural gas, which are expected to benefit customers and investors alike.”
Southern Co. is one of the nation’s biggest users of coal. The company is among the first power companies to buy gas assets as electricity demand slumped, and coal took a backseat to gas.
Coal’s dominance of the nation’s electricity-generation market began to slide as far back as 2009 as a flood of gas from shale formations crashed prices and made it a cheap alternative to the more-polluting fuel, Bloomberg reports. Gas surpassed it as the premier fuel for U.S. power generation in April 2015.
Last month, Southern Co. received clearance for its $8 billion takeover of gas distributor AGL Resources Inc., giving the company 11 regulated utilities providing service to about 9 million customers in nine states, Bloomberg reports.
Kinder Morgan plans to use the proceeds from the acquisition to pay down debt, Steve Kean, the company’s president and CEO says in a statement.
Bloomberg has the full story.
