Southern Co.is buying a 50 percent stake in a Houston company’s 7,600-mile pipeline network, adding to the utility’s growing bet on power from natural gas. He also mentioned that this deal, together with other additions such as AGL Resources and PowerSecure, emphasized their leader status and their promise to develop America’s energy infrastructure.
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Kinder Morgan expressed its belief that this transaction will strengthen the existing relationship with Southern Company and allow the two companies to pursue other opportunities in the near future.
Southern Company is acquiring a 50% equity interest in the Southern Natural Gas (SNG) pipeline system from Kinder Morgan Inc.
Atlanta-based Southern Co. serves more than 9 million customers. “We are very pleased to deepen our relationship with them and excited about the growth opportunities this strategic relationship will provide”.
The deal enables Kinder Morgan to reduce leverage to ~5.3x in 2016, and we model the company reaching the targeted 5.0x by 4Q17 (a 0.2x improvement from our prior forecast), a milestone management said would be required before considering dividend growth resumption and/or share repurchases. “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.
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.
Soon after the asset sales announcement, Kinder Morgan’s Chief Financial Officer Kimberly Dang conducted a conference call.
After selling a 50 percent stake in its natural gas pipeline network in the Southeast, Kinder Morgan may soon boost dividend payments.
Companies employed in the oil and gas industry are facing an huge liquidity crisis.
The deal, announced on Sunday night, worked out to around a 11.6 enterprise value-to-Ebitda multiple versus the 12 to 14 times a regulated pipeline would fetch in this market, according to analysts.
The announcement of the JV comes on the heels of the closing earlier in July of Southern Company’s $8 billion acquisition of AGL Resources.
The SNG system fits strategically with Southern Company’s gas distribution service territories and the locations of its gas-fired generating plants.
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Across the USA, the story is the same. The company has earned a National Award of Nuclear Science and History from the National Atomic Museum Foundation for its leadership and commitment to nuclear development and is continually ranked among the top utilities in Fortune’s annual World’s Most Admired Electric and Gas Utility rankings.
