In response to Oneok’s Wednesday announcement that it had entered an agreement to acquire Southern Union Co.’s Texas gas distribution business, Standard & Poor’s Rating Services said Thursday that its ratings and outlook for Oneok (A/Stable/A-1) will not be affected. In making the purchase of the business that supplies approximately 535,000 customers in Texas with natural gas, Oneok CEO David Kyle said the company started as a gas distributor and the business continues to be an important segment of Oneok’s strategy (see Daily GPI, Oct. 17). S&P commented that management has begun to strengthen Oneok’s financial profile, and the acquisition will be financed in accordance with that plan. “The regulated gas distribution business’ relatively low-cost, steady earnings will boost that segment’s share of operating income to 35% to 40% of operating income derived from natural gas production, transport and storage, gathering and processing, and distribution,” S&P said. The ratings agency noted that these businesses have accounted for about 70 to 80% of consolidated operating income with marketing and trading accounting for the remaining portion. However, S&P pointed out that marketing and trading’s contribution fluctuates with commodity price volatility. For example, S&P said marketing and trading accounted for 53% of consolidated operating income in the first half of 2002 compared with 29% in first-half 2001. Enbridge Energy Partners LP closed its acquisition of the Midcoast, Northeast Texas and South Texas systems from Enbridge Inc. The purchase price of $820 million is subject to adjustments for working capital and other items. The Midcoast system includes 4,000 miles of natural gas gathering and transmission pipelines, with an aggregate throughput capacity of 4 Bcf/d, and natural gas treating and processing assets located in the Midcontinent and Gulf Coast regions. Included in the Midcoast system are four interstate pipeline systems, 35 intrastate and wholesale customer gas pipeline systems, 35 gathering and processing/treating systems, 98 gas liquids, crude oil and carbon dioxide trucks and trailers and 48 rail cars. The Northeast Texas system includes 1,200 miles of gas gathering lines with a throughput capacity of 400 MMcf/d, along with five treating plants and four processing plants. The South Texas system consists of 175 miles of gas gathering lines with a capacity of 100 MMcf/d and one treating plant. The South Texas gathering system interconnects with 500 miles of gas transmission lines, which the partnership has the right to acquire, subject to among other things, payment by the partnership of the $41 million purchase price and regulatory approvals. Concurrently with the closing, the partnership sold nine million limited partner interests to Enbridge Energy Management LLC for $333 million ($39/share). The partnership intends to use the proceeds from the sale to pay off debt assumed in connection with the acquisitions.

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.