Southern Union Co. reported last week that its subsidiary, Energy Worx, Inc., has entered into a multi-year agreement with Southern Star Central Corp., a private equity fund sponsored by American International Group, Inc. (“AIG”), to manage and operate its recently acquired Central Pipeline.

Southern Star acquired the Central Pipeline from the Williams Companies, Inc. in a $555 million deal that closed November 15 (see NGI, Sept. 23). The 6,000-mile interstate pipeline transports natural gas from Kansas, Oklahoma, Texas, Wyoming and Colorado to markets in the Midwest. Designed with a system capacity of 2.3 Bcf/d, the pipeline has an annual throughput of 337.5 trillion Btu.

“The agreement signed today marks yet another step in our strategy to re-deploy our assets and personnel to capitalize on current opportunities in the energy market,” said Thomas F. Karam, president of Southern Union. “The Energy Worx team has considerable, demonstrated operating experience in the natural gas distribution and transmission sectors. We look forward to working closely with AIG and the existing Central team to operate one of the finest pipelines in the nation. The company continues to actively explore opportunities available in the energy industry and expects to make additional announcements in the near future.”

To head up Energy Worx, Karam announced the appointment of David W. Stevens as president and COO of the subsidiary. Stevens comes to the position from his current roles of executive vice president and chief of utility operations for Southern Union, which he has held since May 2001. Stevens also has been the president of its Austin-based division, Southern Union Gas, since June 1998. Southern Union said Energy Worx will maintain offices in Owensboro, KY, and Austin, TX.

Southern Union recently announced plans to sell its Southern Union Gas division and related Texas assets to Oneok Inc. for $420 million in cash (see NGI, Oct. 21). The transaction is expected to close following clearance by the Federal Trade Commission under the Hart-Scott-Rodino Act and approval by certain Texas municipalities.

The AIG Highstar fund was formed to make structured equity investments in infrastructure-related projects and operating companies. In addition to the Central pipeline, the fund currently has a “major investment” in a natural gas storage facility in Upstate New York, owns a couple of power plants and a transportation logistics company.

Southern Union Co. serves approximately 1.5 million natural gas customers through its major operating divisions in Texas, Missouri, Pennsylvania, Rhode Island, Massachusetts and Mexico. In addition to its gas assets, the company also owns and operates electric generating facilities in Pennsylvania.

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