Enron Corp. agreed late Wednesday to sell its natural gas pipeline business, CrossCountry Energy, to a joint venture of Southern Union Co. and a General Electric Co. unit in a transaction valued at $2.45 billion. CrossCountry holds Enron’s interest in three domestic gas pipelines, and is one of its final prized assets.
Enron and its Official Committee of Unsecured Creditors determined that the offer by CCE Holdings Ltd. was in the best interest of Enron’s estate and its creditors. The offer still requires approval by the Bankruptcy Court for the Southern District of Yew York, and a hearing is scheduled for Sept. 9. If approved, the transaction is expected to close by mid-December.
“This acquisition will be our second transforming transaction in less than two years,” said Southern Union CEO George L. Lindemann. “With approximately 20,000 miles of interstate pipelines, we’ll rank among the largest pipeline companies in the nation.”
The pipeline system owned or operated by CrossCountry is comprised of 9,700 miles of pipeline with 8.6 Bcf/d of natural gas transportation capacity.
Transwestern owns and operates a 2,400-mile pipeline that transports natural gas from the San Juan, Anadarko and Permian Basins to markets in the Mid-Continent, Texas, Arizona, New Mexico and California. Its bi-directional flow capabilities provide flexibility to adapt rapidly to regional demand. Its customers include local distribution companies, producers, marketers, electric power generators and industrial end-users.
Citrus, a joint venture held 50% by CrossCountry and 50% by Southern Natural, an affiliate of El Paso Corp., owns Florida Gas Transmission (FGT), a 5,000-mile natural gas pipeline extending from South Texas to South Florida with mainline capacity of 2.1 Bcf/d. FGT has access to diverse natural gas supplies from the Gulf of Mexico, Texas and Louisiana. With more than 240 delivery points and connections to more than 50 natural gas-fired electric generation plants, FGT serves the rapidly growing Florida peninsula. Its customers include electric utilities, independent power producers, co-generation facilities, municipal generators and local distribution companies.
Northern Plains is one of the general partners of Northern Border Partners LP, which holds ownership interests in Northern Border Pipeline Co., Midwestern Gas Transmission Co., Viking Gas Transmission Co. and Guardian Pipeline LLC.
Thomas F. Karam, Southern Union’s COO, said the deal would be immediately accretive to the company. “Southern Union will now have a substantial interstate pipeline footprint and will continue to have a leadership position in liquefied natural gas imports — a critical component of our nation’s future energy security.”
To date, Southern Union has received clearance from the Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvement Act, approval for the transaction from the Missouri Public Service Commission, approval to issue securities from the Pennsylvania Public Utility Commission and approval to invest in CCE Holdings from the Massachusetts Department of Telecommunications and Energy (MDTE). Southern Union awaits only approval from the MDTE to issue securities in connection with the transaction. The transaction is also subject to other customary closing conditions.
J.P. Morgan Securities Inc. served as financial adviser to Southern Union in connection with this transaction. Affiliates of J.P. Morgan and Merrill Lynch provided to Southern Union and CCE Holdings financing commitments for the transaction.
The sale is a $100 million premium over an initial offer for the pipelines by NuCoastal LLC, a company run by Coastal Corp. founder Oscar Wyatt Jr., which offered $2.2 billion in May (see Daily GPI, May 24). Following NuCoastal’s offer, Southern Union and GE offered $2.35 billion. Both offers included the assumption of $430 million in debt.
The CrossCountry sale is part of Enron’s plan to emerge from its complicated bankruptcy, but what it will emerge as is still questionable. The reorganization plan also assumes Enron will sell Portland General Electric, its Pacific Northwest-based utility for $1.25 billion in cash and $1.1 billion in assumed debt to an investment group backed by Texas Pacific Group.
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