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AEP Closes Deal on Equitable Midstream Assets

December 7, 1998
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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 was announced.

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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