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Southern Co. buys $1.5B pipeline share from Kinder Morgan

Southern Co. is buying a 50 percent share in a 7,600-mile Kinder Morgan pipeline system that runs through multiple states and includes one line that connects to the Elba Island LNG terminal in Chatham County and another that runs down the Georgia coast.

Texas-based Kinder Morgan will continue to operate the Southern Natural Gas pipeline system that allows natural gas supplies from production areas in the Gulf states to flow to customers in Mississippi, Alabama, Georgia, South Carolina and Tennessee. Kinder Morgan is the largest energy infrastructure company in North America. It owns an interest in or operates approximately 84,000 miles of pipelines and approximately 180 terminals, including Elba Island.

Southern Co. is the parent company of Georgia Power. It recently completed its merger with AGL Resources, making it the second largest utility company in the U.S. with a customer base of more than 9 million. The merged company operated nearly 200,000 miles of electric transmission and distribution lines and more than 80,000 miles of gas pipelines before the addition of the SNG pipelines.

The transaction, which the companies expect to complete in the third quarter or early in the fourth quarter of 2016, will cost Southern about $1.47 billion, according to a company statement. Southern Co. expects to finance the initial purchase, as well as any related future growth opportunities in a credit-supportive manner. 

“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. Chairman, President and CEO Thomas A. Fanning said in a prepared statement.

Steve Kean, Kinder Morgan president and chief executive officer said in a prepared statement the company will use the sale to pay down its debts.

“This is another step towards achieving our stated goals of strengthening our balance sheet and positioning the company for long-term value creation,” he said.

In April, Kinder Morgan scrapped its plan to build the controversial Palmetto Pipeline after the Georgia legislature put a temporary moratorium on granting permits or licenses for petroleum pipelines. Kinder Morgan had proposed the Palmetto Pipeline to carry gasoline and ethanol across Georgia and into Florida. The company also canceled a natural gas pipeline in the Northeast, the Northeast Direct. Scrapping both plans played a large role in reducing Kinder Morgan’s capital project backlog by $4.1 billion. 

 

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