El Paso Energy Corp. completed its $24 billion merger with The Coastal Corp. on Monday to create the fourth largest US energy company with a total value of more than $50 billion, officials said.
The US Federal Trade Commission cleared the way for that combination after company executives agreed to divest interests in five pipeline systems and other assets.
Included in the pipeline divestitures are El Paso�s Midwestern Gas Transmission system; Coastal�s 16% stake in the Iroquois pipeline; and its 50% interests in the Empire State pipeline, the Stingray pipeline, and the United Texas Offshore System (UTOS).
El Paso will also divest Coastal�s ownership of the Gulfstream natural gas pipeline project.
Proceeds from those sales are expected to total $243 million and will be used to pay debt and to fund future growth opportunities, officials said.
Also as part of the transaction, El Paso Energy Partners LP has sold its interests in several pipelines to other companies for undisclosed sums.
El Paso has sold its interests in the Green Canyon and Tarpon gathering systems to Williams.
Enterprise Products Partners LP has acquired 100% of Sailfish Pipeline Co. LLC and Moray Pipeline Co. LLC. Sailfish owns a 25.67% interest in each of Manta Ray Offshore Gathering Co. LLC and Nautilus Pipeline Co. LLC. Moray owns a 33.92% interest in Nemo Gathering Company, L.L.C.
Shell Gas Transmission LLC and Enterprise Products Partners LP have formed a joint venture dubbed Starfish Pipeline Company LLC that will acquire 100% of Stingray Pipeline Co. LLC, East Breaks Gathering Co. LLC, and West Cameron Dehydration Co. LLC from Deepwater Holdings LLC, an affiliate of El Paso Energy Partners.
Proceeds from sale of those assets will be combined with $29 million cash from El Paso Energy Corp. and reinvested into new businesses and assets, official said.
Under the terms of the merger, Coastal shareholders will receive 1.23 shares of El Paso Energy common stock for each share of Coastal common and Class A common stock on a tax-free basis. Coastal�s outstanding convertible preferred stock will be exchanged for El Paso Energy common stock on the same basis as if it had been converted into Coastal common immediately prior to the merger.
�This merger is a transforming event for both El Paso Energy and Coastal,� said William A. Wise, chairman and CEO of El Paso Energy.
�The scale we now possess opens an even wider range of extraordinary opportunities. Our combination of assets, intellectual capital, and financial resources creates the largest and most broadly based natural gas company in the world,� he said. �We are better positioned than at any other time to sustain 15%-plus earnings growth from our existing businesses and from our portfolio of new business opportunities, including telecommunications, LNG, and financial services.�
The combined company has been organized into four reporting segments. One segment, the El Paso Pipeline Group, will manage its 58,000 miles of interstate pipelines. The group�s five interstate pipeline companies�ANR Pipeline Co., Colorado Interstate Gas Co., El Paso Natural Gas Co., Southern Natural Gas Co., and Tennessee Gas Pipeline Co.�will continue to operate as separate pipelines with separate tariffs, officials said.
ANR and Tennessee Gas Pipeline will comprise the Eastern Pipeline group headquartered in Houston. El Paso Natural Gas and Colorado Interstate Gas will make up the Western Pipeline group based in Colorado Springs. Southern Natural Gas will continue to be based in Birmingham, Ala.
The Merchant Energy Group will manage El Paso Energy�s wholesale customer business and its extensive portfolio of natural gas, power, and energy assets worldwide. Officials said that segment has demonstrated 250% growth on a pro forma basis over the last 3 years.
The Production business unit holds reserves totaling 6 tcf of natural gas equivalent and controls more than 3 million net acres. Last year, that combined unit added 1.9 tcf of gas reserves on a pro forma basis at a reserve replacement cost of $1.07/Mcf equivalent, officials said.
El Paso Field Services segment holds interests in 24,000 miles of intrastate pipeline and gathering systems; 35 processing and treating plants; and eight offshore platforms.
The newly formed El Paso Global Networks Co. also will focus on developing a bandwidth merchant platform for the commercially under-developed broadband industry, officials said.
David A. Arledge, former chairman and CEO of Coastal, will join El Paso Energy�s board of directors as vice chairman. Arledge will retire as a company executive but will remain with the combined company in an advisory role, officials said.