Kinder Morgan to sell stake in southeastern pipeline system

Kinder Morgan Inc. signage is displayed at the company's facility in Richmond, California, U.S., on Friday, Nov. 21, 2014. (David Paul Morris/Bloomberg)
(David Paul Morris/Bloomberg)

By Lydia DePillis

Kinder Morgan, the nation’s largest operator of natural gas pipelines, announced today that it is selling half of its southeastern pipeline system in an effort to pay down debt accumulated over the course of the prolonged energy downturn.

The electrical and gas utility Southern Company will pay $1.47 billion for a 50 percent equity interest in the 7,600-mile network of pipelines, which connects natural gas sources along the Gulf Coast to Georgia, Alabama, and South Carolina.

“A significant advantage of this transaction is that we will be able to take the proceeds and immediately pay down debt,” says Kinder Morgan spokesman Dave Conover. “That’s something that senior management has been committed to, and it’s a very big deal for our shareholders.”

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Along with Kinder Morgan’s decision last month to sell half of its Utopia project in Canada, the proceeds will be enough to relieve the company’s immediate cash crunch, Conover said. The company also expects the deal to come with further expansions of the pipeline system to serve Southern Company’s customers in the region.

Kinder Morgan had cut its dividend to shareholders by 74 percent last December to preserve cash while attempting to manage mounting debts. The company says it does not expect today’s sale to change its credit rating.

In the spring, Kinder Morgan announced it was cutting back on a raft of planned projects in order to maintain profitability after its stock dropped from a high of $44 in April of 2015 to a low of $13 in January of 2016. The stock has stabilized since then, with the news that two big projects — the Trans Mountain oil pipeline in Canada and a liquefied natural gas export facility in Georgia — had been approved by regulatory authorities.

READ MORE: Kinder Morgan halts work on $1 billion Palmetto Pipeline

Kinder Morgan, the nation’s largest operator of natural gas pipelines, announced Sunday  that it is selling half of its southeastern pipeline system in an effort to pay down debt accumulated over the course of the prolonged energy downturn.

The electrical and gas utility Southern Company will pay $1.47 billion for a 50 percent equity interest in the 7,600-mile network of pipelines, which connects natural gas sources along the Gulf Coast to Georgia, Alabama, and South Carolina.

“A significant advantage of this transaction is that we will be able to take the proceeds and immediately pay down debt,” says Kinder Morgan spokesman Dave Conover. “That’s something that senior management has been committed to, and it’s a very big deal for our shareholders.”

Along with Kinder Morgan’s decision last month to sell half of its Utopia project in Canada, the proceeds will be enough to relieve the company’s immediate cash crunch, Conover said. The company also expects the deal to come with further expansions of the pipeline system to serve Southern Company’s customers in the region.

In the spring, Kinder Morgan announced it was cutting back on a raft of planned projects in order to maintain profitability after its stock dropped from a high of $44 in April of 2015 to a low of $13 in January of 2016. The stock has stabilized since then, with the news that two big projects — the Trans Mountain oil pipeline in Canada and a liquefied natural gas export facility in Georgia — had been approved by regulatory authorities.

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