2011-02-18-2011-02-09-2011-02-09

Bought co. and primary asset Southern Pines Energy Center gas storage facility, gaining four caverns permitted for 40 Bcf working capacity.

Houston-based PAA Natural Gas Storage (NYSE: PNG) has acquired SG Resources Mississippi LLC and its primary asset, the Southern Pines Energy Center gas storage facility, for $750 million.

Southern Pines is a FERC-regulated, high-performance, salt-cavern gas storage facility in Greene County, Mississippi. The facility was placed in service in 2008 and three caverns are currently in operation. The facility is permitted for 40 billion cubic feet (Bcf) of working capacity from four storage caverns. The fourth cavern is currently being drilled, and the facility has the capacity for further expansion, subject to permits and market demand.

Southern Pines has an aggregate of 48,000 horsepower of compression and is permitted for peak injection and withdrawal rates of approximately 1.2 Bcf and 2.4 Bcf of gas per day, respectively. Southern Pines connects directly or indirectly to eight major gas pipelines servicing the Gulf Coast, Northeast, Mid-Atlantic and Southeastern markets.

Approximately $600 million of equity financing was provided by the sale in a private placement of 17.4 million PNG common units to third-party purchasers and 10.2 million PNG common units to Plains All American Pipeline LP (NYSE: PAA), as well as PAA's proportionate general partner contribution. The debt financing consisted of PNG selling a three-year, $200 million note to PAA at an interest rate of 5.25% per annum.

Pending investment in expansion activities at Southern Pines, excess proceeds will be used to reduce PNG's existing indebtedness. Giving effect to these transactions, PAA holds an aggregate 64% equity ownership in PNG, including 100% of PNG's general partner and its incentive distribution rights.

Simmons & Co. International and SunTrust Robinson Humphrey were financial advisors to PNG.