Dallas-based Atmos Energy Corp. last week inched closer to becoming the largest pure-play natural gas distributor in the United States, after receiving final approval from the Missouri Public Service Commission (PSC) to acquire the gas distribution and pipeline operations of TXU Gas Co. Atmos, which is buying the largest gas utility in Texas for $1.925 billion, expects to close the deal by Friday (Oct 1).

The Missouri PSC’s unanimous decision was the third and final approval that Atmos needed to complete the transaction, which was based on a stipulated agreement negotiated between Atmos, the PSC staff and the Missouri Office of Public Counsel. The transaction previously had received federal regulatory reviews and approvals from the regulatory commissions in Iowa and Virginia. The Railroad Commission of Texas was not required to approve the transaction but may consider it in future ratemaking decisions, according to Atmos. The transaction was first announced in June (see NGI, June 21).

Robert W. Best, Atmos CEO, said the acquisition will add approximately 1.5 million customers in the Dallas-Fort Worth Metroplex and more than 500 other communities in North Texas, bringing Atmos’ total customer base to 3.1 million gas-only utility customers in 12 states. More than 90% of Atmos’ operating income is derived from its regulated gas operations. Atmos’ non-utility gas marketing operations also serve approximately 1,000 large industrial customers and municipal gas systems in 18 states.

“TXU Gas is a perfect fit with Atmos Energy’s current system,” Best said. “Atmos Energy will serve more customers than any other gas utility in the country’s largest gas market — Texas — and we will operate one of the largest intrastate natural gas pipeline systems in the country. This acquisition not only will enhance our diverse operations across the United States, but also will concentrate much of our system closer to our Dallas headquarters.”

TXU Gas’ operations will become a separate division of Atmos Energy Corp., Best said. In the coming months, the operations will be renamed Atmos Energy to reflect the company’s national brand name and trademark.

“We will provide TXU Gas customers with the same safe and reliable energy supplies and quality service they have come to expect,” Best said. “Our new customers will benefit from Atmos Energy’s economies of scale and advanced technologies to help keep gas bills as low as possible. They also can continue to rely on the expertise of some 1,350 TXU Gas employees who will be transferring to our company.”

The transaction is expected to be immediately accretive to fiscal 2005 earnings, contributing between 5-10 cents to Atmos’ diluted earnings per share. Atmos will finance the transaction with an interim senior credit facility led by Merrill Lynch and will arrange for permanent funding of the acquisition, consisting of approximately $500-600 million of equity and the remainder funded with long-term debt. A portion of the equity was issued in July.

©Copyright 2004 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.