Kinder Morgan, Inc. (NYSE: KMI), a leader in natural gas pipeline development and operations, announced on Sunday that it would sell 50% stake in Southern Natural Gas (SNG) pipeline system to Southern Company (NYSE: SO), one of the pipeline system’s customers, for $1.47 billion. After the acquisition, Kinder Morgan will continue to operate the SNG pipeline system.
Southern Natural Gas (SNG) pipeline system, a 7,600-mile pipeline system, connects natural-gas supply fields in Texas, Louisiana, Mississippi, Alabama and the Gulf of Mexico with the markets in Louisiana, Mississippi and other five states in the US. In addition, SNG is also the main force of transporting natural gas to areas such asAlabama, Georgia and South Carolina.
The deal between Kinder Morgan and Southern Company will help Kinder Morgan to lower the ratio of debt to EBITDA below this year’s target level, which is a good news for Kinder Morgan when it was trying to lessen debt load. The deal will also help the company to restore its dividend, which was cut by 75% last year in a struggle to choose whether devoting the cash to developing the company or funding the dividend.
“The transaction significantly advances our effort to strengthen our balance sheet and move us closer to returning value to shareholders in the form of an increased dividend or stock repurchases,” Steve Kean, Kinder Morgan Chief Executive, said in a statement.
Southern Company’s Chairman, President and CEO Thomas A. Fanning said that the deal with Kinder Morgan is in line with the infrastructure development strategy of the company. 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. “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,” he said.