Kinder Morgan will sell a 50% stake in its 7,600-mile natural gas pipeline system to Southern Gas Company for an estimated $1.47 billion. Kinder Morgan will continue to operate the system.
The Southern Natural Gas (SNG) system connects 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.
The announcement comes as Kinder Morgan looks for ways to lighten its debt load. In addition, the agreement commits the companies to cooperatively pursue specific growth opportunities to develop natural gas infrastructure for the strategic venture.
“This transaction is consistent with the infrastructure development strategy we have discussed for well over a year, said Southern Company Chairman, President and CEO Thomas A. Fanning, who cited the Atlanta-based company’s recent additions of AGL Resources and PowerSecure.
Inclusive of existing SNG debt, the transaction equates to an SNG “total enterprise value” of about $4.15 billion, Kinder Morgan said in a written statement.
Steve Kean, Kinder Morgan president and CEO, said, “We plan to use all of the proceeds from this transaction to reduce debt at KMI. This is another step toward achieving our stated goals of strengthening our balance sheet and positioning the company for long-term value creation.”
The transaction is still subject to federal clearance 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.