Southern Company has signed an agreement to acquire a 50% stake in US-based Kinder Morgan’s southern natural gas (SNG) pipeline system for $1.47bn.
Following the deal, Kinder Morgan will continue to operate the pipeline system.
The 7,600-mile SNG pipeline connects natural gas supply basins in Texas, Louisiana, Mississippi, Alabama and the Gulf of Mexico to Louisiana, Mississippi, Alabama, Florida, Georgia, South Carolina and Tennessee markets.
It transports natural gas to Alabama, Georgia and South Carolina, part of growing natural gas demand regions in the US.
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.
“Our new ownership stake in SNG will position Southern Company for future growth opportunities and enhanced access to natural gas, which are expected to benefit customers and investors alike."
Under the agreement, the companies will together pursue specific growth opportunities in a bid to develop natural gas infrastructure for the strategic joint venture formed by them.
Furthermore, Southern Company and Kinder Morgan will work to advance their efforts to develop infrastructure, which is vital for the country’s energy future.
Kinder Morgan president and CEO Steve Kean said: "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."
The transaction is subject to the notification and clearance and reporting requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and is expected to close in the third quarter or early in the fourth quarter of this year.
