Atmos Picks Up Citizens' Louisiana Distribution Assets
Continuing its aggressive acquisitions strategy, Atmos Energy Corp. said last week it has reached a definitive agreement to pay $375 million for the gas operations of two Citizens Utilities Co. distribution subsidiaries - Louisiana Gas Service Co. and LGS Natural Gas Co. Atmos said the acquisitions will make it the largest natural gas distributor in Louisiana with 359,000 customers.
Louisiana Gas Service serves 279,000 customers and is based in Harvey, LA. LGS Natural Gas Co. is an intrastate pipeline company that provides gas transportation service to industrial customers.
Zach Wagner, a utility analyst with Edward Jones, approved of the deal. "I think it makes sense for Atmos. They already had operations in the state, so their relationship with the regulators should already be advanced. With the data I have now, it looks like they paid a fair price for what they got."
The deal will be accounted for as a purchase and is anticipated to be accretive to earnings in the first full year of operations after closing, excluding one-time charges related to the transaction, Dallas-based Atmos said. The transaction is expected to be completed within 12 months and is subject to approval by the Louisiana Public Service Commission.
"With the pending acquisition of Associated Natural Gas and the addition of Louisiana Gas Service, Atmos' customer base will increase to approximately 1.4 million customers, making Atmos the fifth largest pure gas utility in the United States," said Robert W. Best, CEO of Atmos Energy Corp.
The Associated Natural Gas purchase was announced last October (see NGI, Oct. 25, 1999). Atmos paid Southwestern Energy $32 million in cash to serve 48,000 residential, commercial and industrial customers, primarily located near the towns of Sikeston, Kirksville, Butler and Jackson, MO.
Louisiana Gas Service Co. provides natural gas distribution service to residential and commercial customers in 190 communities in southeastern and northern Louisiana, an area with a combined population of more than 600,000. Its service territory includes the suburban areas of metropolitan New Orleans (excluding Orleans Parish), the north shore of Lake Pontchartrain and the Monroe/West Monroe metropolitan area.
For Citizens, the Louisiana operations are the first of its four gas properties to be sold, the company said. In October 1999, Citizens sold its water and wastewater operations for $835 million and in February of this year sold its electric utility operations for $535 million. The proceeds from the divestitures will be used to permanently fund Citizens' announced acquisitions of nearly one million telephone access lines.
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