Energy Transfer Partners will buy the 2,500-mile Transwestern gas pipeline from GE Energy Financial Services and Southern Union Company for $1.47 billion.
As part of the transaction, Southern Union will boost its ownership stake of Florida Gas Transmission Co. to 50% from 25%, and will eliminate its ownership interest in Transwestern Pipeline. El Paso will own the other half of FGT.
Energy Transfer Partners plans to finance more than half of the purchase price with stock. The deal, which is subject to regulatory approval, is expected to immediately add to earnings.
Transwestern Pipeline connects supply areas in the San Juan Basin in southern Colorado and northern New Mexico, as well as the Anadarko Basin and the Permian Basin in west Texas to markets in the Midwest, Texas, Arizona, New Mexico and California. Transwestern interconnects with ETP's existing intrastate pipelines in west Texas.
"This is the partnership's first acquisition in the interstate pipeline arena, and one which provides an additional platform for growth," said Mike Smith, ETP vice president of mergers and acquisitions. "Transwestern provides Energy Transfer Partners with access to reserves in the San Juan, Piceance and Rockies' basins, and allows us to participate in markets to the West.
"The acquisition of Transwestern also provides producers on our Texas system with access to these western markets," said Smith. "Our proven track record of investing additional capital to expand our pipeline systems and increase interconnect access has provided natural gas producers with multiple markets and has benefited natural gas consumers by moving gas out of the rapidly expanding production areas to those systems supplying customer needs."
As part of the deal, Southern Union will be responsible for $455 million of Transwestern's debt.
"We see several benefits to these transactions," said Southern Union CEO George L. Lindemann. "With our increased investment in Florida Gas, we are upgrading our risk profile, enhancing our strategic position, and preserving our capital while still allowing us to grow well into the future in the strong Florida market."
Southern Union's Eric D. Herschmann, senior executive vice president, added, "Transwestern Pipeline has more strategic value to Energy Transfer, and we believe that in the capable hands of ETP, Transwestern will continue to be a key component of the energy infrastructure in the southwestern United States."
Up to now, ETP's gas transportation and storage operations have been centered in Texas and Louisiana. ETP operates three natural gas storage facilities located in Texas, and it has about 11,700 miles of pipeline in service, with an additional 550 miles under construction to expand services in the Barnett Shale.
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