Southern Co. forms gas pipeline venture following AGL merger

Kinder Morgan

Following on the heels of its merger with AGL Resources, Southern Co. and Kinder Morgan announced a natural gas pipeline venture designed to advance both companies' leadership in energy infrastructure development through Southern Co.'s acquisition of a 50 percent 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.

Southern Co. and Kinder Morgan, will work together to advance both companies’ efforts to develop infrastructure important to America’s energy future.

“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 Co.’s leadership position in electricity and natural gas and our commitment to developing America’s energy infrastructure,” said 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. 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 about $4.15 billion which implies a value of $1.47 billion for Southern’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.

Jones Day, Gibson Dunn & Crutcher LLP, Troutman Sanders LLP and Balch & Bingham LLP are serving as legal counsel to Southern Company, and Bracewell LLP and Weil, Gotshal & Manges LLP are serving as legal counsel to Kinder Morgan.

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