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.
The $1.5 billion deal, announced Sunday evening, creates a joint venture between Kinder Morgan's Southern Natural Gas pipeline and Atlanta-based Southern, an electric utility. Earlier this month, Southern also completed its merger taking over Atlanta natural gas utility AGL Resources.
Southern’s joint venture with Kinder Morgan gives the utility deeper ties to a pipe network connecting several Gulf Coast oil-producing areas to its markets in several southeastern states, including Georgia and Alabama.
Kinder Morgan, which counts Southern Co. as a major customer, said it will use the money to pay down debt. Kinder Morgan will continue to operate the pipeline system.
The companies said they expect to complete the transaction by late summer or early fall.
Among SNG’s pipelines is one running through Stewart County south of Columbus, where a Southern Co. subsidiary is considering building a new nuclear plant.
Georgia Power, the Southern Co. subsidiary, recently sought state regulators' approval to spend $175 million on preliminary studies to eventually build the nuclear plant on land it owns near the pipeline.
But some industry-watchers have speculated that Georgia Power may build a natural gas-fired plant there instead.
Southern Co. said the tie-up with Kinder Morgan will allow the companies to work together on future projects.
“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 Southern Co. CEO Thomas A. Fanning in a written statement.
Southern said it will finance the $1.5 billion deal and future projects in a “credit-supportive manner,” but didn’t elaborate.
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