Southern Co. (NYSE:SO) and Kinder Morgan Inc. (NYSE: KMI) announced July 10 a natural gas pipeline venture under which Southern would acquire a 50% equity interest in the Southern Natural Gas (SNG) pipeline system.
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.
SNG 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. Alabama (Alabama Power) and Georgia (Georgia Power) are states where Southern has electric utility subsidiaries.
“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 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.”
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’s 50% share of the equity interest. 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.
Kinder Morgan owns an interest in or operates approximately 84,000 miles of pipelines and approximately 180 terminals. The company’s pipelines transport natural gas, gasoline, crude oil, CO2 and other products, and its terminals store petroleum products and chemicals, and handle bulk materials like coal and petroleum coke.
Southern has 44,000 MW of generating capacity and 1,500 billion cubic feet of combined natural gas consumption and throughput volume serving 9 million electric and gas utility customers through its subsidiaries. The company provides energy through electric utilities in four states, natural gas distribution utilities in seven states, a competitive generation company serving wholesale customers across America and a nationally recognized provider of customized energy solutions, as well as fiber optics and wireless communications.