Southern Company, Kinder Morgan enter natural gas pipeline venture

“We plan to use all of the proceeds from this transaction to reduce debt at KMI”

Richard D. Kinder, Chairman and Chief Executive Officer of Kinder Morgan Energy Partners

HOUSTON – Southern Company and Kinder Morgan, Inc. have announced a natural gas pipeline venture designed to “advance both companies’ leadership in energy infrastructure development” through Southern Company’s acquisition of a 50 per cent equity interest in the Southern Natural Gas pipeline system.

Kinder Morgan will continue to operate the system. In addition, the agreement commits the companies to cooperatively pursue specific growth opportunities to develop natural gas infrastructure for the strategic venture.

Southern Natural Gas is a 7,600-mile pipeline system connecting natural 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.

“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,” said Southern Company Chairman, President and CEO Thomas A. Fanning.

Southern Natural Gas 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.

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“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,” said Fanning.

Inclusive of existing SNG debt, the transaction equates to an SNG total enterprise value of approximately $4.15 billion which implies a value of $1.47 billion for Southern Company’s 50 per cent share of the equity interest.

Southern Company expects to finance the initial purchase, as well as any related future growth opportunities in a credit-supportive manner.

“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,” said Steve Kean, Kinder Morgan president and chief executive officer.