Kinder Morgan has signed an agreement to divest 50% stake in the Southern Natural Gas (SNG) pipeline system to Southern Company for $1.4bn.
The 7,600-mile pipeline system is designed to transport natural gas from fields in Texas, Louisiana, Mississippi, Alabama, and the Gulf of Mexico to markets in Louisiana, Mississippi, Alabama, Florida, Georgia, South Carolina and Tennessee.
Southern Company chairman, president and CEO Thomas Fanning said: “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,”
Southern Company said that the acquisition will position it for future growth opportunities and improve access to natural gas.
Kinder Morgan will jointly work with Southern Company to advance both companies’ efforts to develop infrastructure to benefit the US energy market.
Kinder Morgan south region pipelines president Norman Holmes said: “Southern Company has been a valued customer of SNG for many years and this agreement draws on the strengths of both companies.
Proceeds from the sale will be used by Kinder Morgan to reduce its debt. The company will continue to operate the pipeline system.
Kinder Morgan president and CEO Steve Kean said: “This is another step towards achieving our stated goals of strengthening our balance sheet and positioning the company for long-term value creation.”
Expected to be completed in the third quarter or early in the fourth quarter of 2016, the deal is subject to clearance and reporting requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Recently, Southern Company has acquired natural-gas distributor AGL Resources for approximately $12bn, including $8bn in total equity.
Image: Kinder Morgan and Southern Company will advance efforts to develop energy infrastructure in US. Photo: courtesy of supakitmod/ FreeDigitalPhotos.net.