National Grid will grow its presence in New England with the purchase of Rhode Island local distribution company assets from Southern Union Co., which said the sale furthers its transition from a utility to a natural gas transportation and services business.
National Grid plans to acquire the Rhode Island business of New England Gas Co. from Southern Union for $575 million, including assumption of $77 million in debt. New England Gas serves about 245,000 customers in 33 Rhode Island communities over more than 3,000 miles of distribution pipelines.
"When it comes to natural gas, National Grid already serves approximately 11 million homes and businesses in the United Kingdom and approximately 565,000 customers in upstate New York," said Michael Jesanis, CEO of National Grid's U.S. business. "New England Gas customers will reap the benefits of our strong local delivery focus and experience..."
UK-based National Grid's existing U.S. assets provide power and gas transmission and distribution for nearly four million customers across 29,000 square miles of Massachusetts, New Hampshire, New York and Rhode Island. In Rhode Island, National Grid already delivers power to about 477,000 customers in 38 communities.
The combination is expected to be immediately accretive to earnings, Jesanis told NGI, but no details on projected cost savings were available. "It's a little too early to make a specific prediction. We have obviously numbers we've developed and those will be developed further over the ensuing weeks as we can actually work more closely with our new colleagues at New England Gas."
Jesanis said National Grid participated in a competitive bidding process for New England Gas against unnamed competitors. The transaction is expected to close this summer. It requires approval by Rhode Island regulators and clearance under the Hart-Scott-Rodino Act. The companies said that all active employees of the Rhode Island operations will be offered jobs with National Grid.
Southern Union said it will retain New England Gas' North Attleboro and Fall River, MA, operations. A Southern Union spokeswoman said these assets were excluded in order to minimize the complexity of the deal. Sale proceeds will be used to retire a portion of the bridge facility financing for the acquisition of Sid Richardson Energy Services, which is slated for an early March closing (see NGI, Dec. 19, 2005).
"The sale of these assets is part of the continuing transformation of Southern Union Co. from a utility to a leader in the natural gas transportation and services industry," said Southern Union CEO George Lindemann.
In January, Southern Union said it had agreed to sell the assets of its PG Energy gas distribution division in Pennsylvania to UGI Corp. for $580 million. "The sale of PG Energy in conjunction with the acquisition of Sid Richardson Energy Services will allow Southern Union to continue to grow as one of the country's leading energy companies," Lindemann said at the time. "Because Southern Union will no longer have a large employee base in Pennsylvania, we will be consolidating our corporate operations and activities in Houston."
National Grid owns the high-voltage transmission network in England and Wales and operates the system across Great Britain. It also owns and operates Britain's gas transmission system, and through its gas distribution business delivers gas to more than 10 million homes and businesses in Britain. It also is active in LNG importation, wireless broadcast infrastructure and telecommunications, property, metering and interconnectors.
Southern Union is mainly active in natural gas transportation, storage and distribution and operates about 18,000 miles of interstate pipelines serving the Southeast, West, Midwest and Great Lakes region. It also has gas distribution operations in Missouri, Pennsylvania, Rhode Island and Massachusetts.
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