By OGJ editors
HOUSTON, Aug. 11 -- Sempra Energy, San Diego, plans to expand its Gulf Coast gas storage and pipeline operations by merging with Mobile, Ala.-based EnergySouth Inc. for $510 million in cash. EnergySouth is a holding company for a group of energy-related subsidiaries operating in the gas industry's midstream services and distribution areas.
Because Sempra intends to bring an LNG terminal at Cameron, La., online this year and has plans for another at Sabine Pass, gas storage along the Gulf Coast is critical for handling the future influx of regasified LNG. The new assets will complement Sempra's facilities and expand its effective presence along the Gulf Coast.
Central to the transaction, Sempra said, will be acquisition of EnergySouth Midstream Inc. assets, including majority ownership in two large, high-cycle underground gas storage facilities, which will have 57 bcf of capacity when fully developed. These facilities will serve the nation's fastest-growing gas markets, the company said.
George S. Liparidis, president and chief executive of Sempra Pipelines & Storage, which will operate the facilities after the merger, said: "Similar to our existing Liberty Gas storage assets in Louisiana, EnergySouth's valuable, high-cycle, salt-dome storage caverns allow maximum flexibility to inject, withdraw, and reinject gas several times a year, providing customers ample opportunity to hedge against market volatility."
EnergySouth Midstream Inc. is the general partner in and 91% owner of Bay Gas Storage Co. 40 miles north of Mobile that also provides underground gas storage and delivery. It is the easternmost storage facility on the Gulf Coast and has direct service to the growing Florida market. Bay Gas has 11.4 bcf of working gas storage capacity that is fully contracted and operational. An additional 5 bcf is 92% contracted, and that storage is under construction, with a scheduled first-quarter 2010 in-service date. Plans are under way to increase total Bay Gas capacity to 27 bcf of underground salt-dome storage.
EnergySouth Midstream also owns 60% of Mississippi Hub LLC, which is developing high-cycle, underground salt-dome gas storage in Simpson County, Miss.
"This facility has planned direct interconnections to the growing natural gas production areas in eastern Texas, Oklahoma, and Arkansas, as well as the Northeast market," Sempra said. Mississippi Hub's first 6 bcf of storage capacity is under construction and is expected to begin operations in second-quarter 2010. Long-term commitments are in place for 4 bcf of the capacity. The company plans to increase total Mississippi Hub capacity to 30 bcf of high-cycle, salt-dome storage.
In the deal Sempra will acquire EnergySouth unit Mobile Gas Service Corp., an Alabama gas distribution utility serving 93,000 customers in southwest Alabama, an area of growing demand.
The boards of Sempra Energy and EnergySouth have approved the transaction, and, subject to regulatory and EnergySouth shareholder approval, it is expected to close by yearend.
Sempra Energy said it will fund the transaction from operating cash flow and debt. Shareholders of EnergySouth will receive $61.50/share for EnergySouth stock. "The company will continue its previously announced $1.5 billion share-repurchase program," Sempra Energy said.