AEP Resources Inc., a wholly owned subsidiary of AmericanElectric Power, completed the purchase of the midstream gasoperations of Equitable Resources Inc.

The transaction, valued at $320 million plus working capital,was first announced Sept. 14 (see Daily GPI Sept. 15, 1998). Themidstream operations include a fully integrated gas gathering,processing and storage operation in Louisiana and an energy tradingand marketing business based in Houston. Assets include LouisianaIntrastate Gas (LIG), a 2,000-mile intrastate pipeline system; fourgas processing plants that straddle the pipeline, plus a fifthplant currently under construction; and Jefferson Island storagefacilities, including an existing salt dome storage cavern and asecond cavern under construction, both directly connected to theHenry Hub. The pipeline and storage facilities are interconnectedto 12 interstate and 24 intrastate pipelines running to majormarkets in the Northeast, Midwest and Southeast.

The acquisition builds up the natural gas side of AEP’s businessand helps the company become a Btu trading power. “The tradinggroup views this acquisition as a great platform to expand thatbusiness and make gas as big a part of our trading organization aspower. This is a great strategic opportunity for us,” said SteveLewis, senior vice president of AEP Energy Services, when the dealwas announced.

AEP Resources trades more than one Bcf of gas daily, but thedeal marks the company’s first foray into the actual acquisition ofgas assets. “These assets give us a unique window into the gasmarket at a very strategic location,” said Paul Addis, AEPexecutive vice president. Since the “vast majority of our nation’sgas flows through Louisiana,” the acquisition of EquitableResources’ intrastate pipeline and other midstream assets “willgive us access to much of the nation’s gas as it goes into itsdifferent geographic markets and its different market sectors.”

Regulatory approvals were obtained from the Securities andExchange Commission, the Department of Justice under theHart-Scott-Rodino Act and the Louisiana Public Service Commission.The Federal Communications Commission also approved the transfer ofmobile telecommunications licenses.

Divesting the midstream operations is part of Equitable’sstrategy to focus on growth in its core businesses. EquitableResources is an integrated energy company, with emphasis onAppalachian area gas production, gas transmission and distributionand energy services marketing in the northeastern United States.The company also has exploration and production interests in theGulf of Mexico and energy service management projects in selectedU.S. and international markets.

Joe Fisher, Houston

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