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Southern Selling Two NatGas Utilities to SJI for $1.7B

Southern Company announced Monday that it has reached a deal to sell its Elizabethtown Gas and Elkton Gas affiliates to South Jersey Industries (SJI) for $1.7 billion. 

The Southern Company Gas utilities serve about 294,000 residential, business and industrial gas customers in New Jersey and Maryland. The deal, if completed as expected in 3Q2018 would allow SJI to become the second largest natural gas provider in New Jersey with 675,000 customers after Public Service Electric and Gas Co., which serves 1.8 million.

SJI said the effective purchase price, taking into account the tax benefits, would be $1.4 billion. Neither customers nor employees are expected to be effected, SJI said.

The company also operates several nonregulated businesses, but the purchase of Elizabethtown and Elkton utilities would contribute more than 80% to total earnings.  The deal is expected to be accretive by 2020, the first full year of operations without transaction impacts. SJI said it would fund the acquisitions by issuing stock or long-term debt, the timing of which would be influenced by regulatory approvals and market conditions.

In addition to approvals from the New Jersey Board of Public Utilities and the Maryland Public Service Commission, the Federal Energy Regulatory Commission and the Federal Communications Commission need to sign-off.

The bulk of the transaction includes Elizabethtown Gas, a company that traces its roots to the 19th century and which serves 288,000 customers in New Jersey. SJI said its familiarity and business relationships in the state make Elizabethtown a natural fit. Southern said SJI would honor all the collective bargaining agreements in place and employee pension benefits if the deal closes.

If that happens, Southern Company Gas would be left with regulated gas distribution companies in five states. Southern CEO Thomas Fanning said the sale would strengthen the affiliates’ balance sheets by reducing existing financing requirements. 

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