AEP Closes Deal on Equitable Midstream Assets
AEP Resources Inc., a wholly owned subsidiary of American
Electric Power, completed the purchase of the midstream gas
operations of Equitable Resources Inc.
The transaction, valued at $320 million plus working capital,
was first announced Sept. 14 (see Daily GPI Sept. 15, 1998). The
midstream operations include a fully integrated gas gathering,
processing and storage operation in Louisiana and an energy trading
and marketing business based in Houston. Assets include Louisiana
Intrastate Gas (LIG), a 2,000-mile intrastate pipeline system; four
gas processing plants that straddle the pipeline, plus a fifth
plant currently under construction; and Jefferson Island storage
facilities, including an existing salt dome storage cavern and a
second cavern under construction, both directly connected to the
Henry Hub. The pipeline and storage facilities are interconnected
to 12 interstate and 24 intrastate pipelines running to major
markets in the Northeast, Midwest and Southeast.
The acquisition builds up the natural gas side of AEP's business
and helps the company become a Btu trading power. "The trading
group views this acquisition as a great platform to expand that
business and make gas as big a part of our trading organization as
power. This is a great strategic opportunity for us," said Steve
Lewis, senior vice president of AEP Energy Services, when the deal
AEP Resources trades more than one Bcf of gas daily, but the
deal marks the company's first foray into the actual acquisition of
gas assets. "These assets give us a unique window into the gas
market at a very strategic location," said Paul Addis, AEP
executive vice president. Since the "vast majority of our nation's
gas flows through Louisiana," the acquisition of Equitable
Resources' intrastate pipeline and other midstream assets "will
give us access to much of the nation's gas as it goes into its
different geographic markets and its different market sectors."
Regulatory approvals were obtained from the Securities and
Exchange Commission, the Department of Justice under the
Hart-Scott-Rodino Act and the Louisiana Public Service Commission.
The Federal Communications Commission also approved the transfer of
mobile telecommunications licenses.
Divesting the midstream operations is part of Equitable's
strategy to focus on growth in its core businesses. Equitable
Resources is an integrated energy company, with emphasis on
Appalachian area gas production, gas transmission and distribution
and energy services marketing in the northeastern United States.
The company also has exploration and production interests in the
Gulf of Mexico and energy service management projects in selected
U.S. and international markets.
Joe Fisher, Houston
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