Southern Union Company (SUG) announced the completion and commencement of service of the Florida Gas Transmission Company’s (FGT) $2.48 billion Phase VIII Expansion project. The expansion increases the capacity of FGT’s mainline facilities from the Mobile Bay, Alabama area to southern Florida.
The project also provides additional transportation service capacity throughout Florida to meet the state’s rising energy demand. The FGT Phase VIII Expansion project included the construction of approximately 483 miles of pipeline in Alabama and Florida.
Earlier in November 2009, Federal Energy Regulatory Commission approved Florida Gas’ application to construct the expansion project. At fiscal-end 2010, the company was able to enter into transportation service agreements with shippers for 25-year terms accounting for approximately 74% of the newly added capacity.
Florida Gas Transmission Company, a subsidiary of Citrus Corporation, operates an approximately 5,500-mile natural gas pipeline system. The pipeline system extends from south Texas to south Florida with mainline capacity of approximately 3 billion cubic feet per day. Citrus Corp. is an equally owned joint venture between Southern Union and El Paso Corporation (EP).
Southern Union Company, headquartered in Houston, is one of U.S.’s leading diversified natural gas companies, engaged primarily in the transportation, storage, gathering, processing and distribution of natural gas.
The company owns and operates one of the nation’s largest natural gas pipeline systems with more than 20,000 miles of gathering and transportation pipelines and one of North America’s largest liquefied natural gas import terminals, along with serving more than half a million natural gas end-user customers in Missouri and Massachusetts.
Southern Unionis a low-cost natural gas player with a strategic midstream presence. The company’s regulated asset base of transmission pipelines, storage assets and natural gas utilities generates stable earnings that will help alleviate concerns related to struggling natural gas prices. The company is also prudent in focusing on long-term contracts for a lion’s share of its fee-based transportation and storage business.
Southern Union is prudent in identifying and investing in capital expansion projects across its base of transmission, storage, gathering, processing and distribution assets in the evolving North American natural gas markets.
Management has taken several measures to improve financial stability and reduce the overall risk profile of the company, which includes opportunistically monetizing assets that no longer are a strategic fit, focusing on the fee-based transportation and storage business and being proactive in hedging to mitigate volatility in commodity margins.
Southern Union currently with the quantitative Zacks #3 Rank (Hold) indicates no directional pressure on the shares over the near term. Over the longer term we maintain our Neutral recommendation on Southern Union.
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