El Paso Pipeline has agreed to acquire an additional 16 percent interest in Southern Natural Gas Company (SNG) from El Paso Corporation for approximately $394 million. The acquisition will increase El Paso Pipeline Partners' interest in SNG to 41 percent. El Paso Corporation has granted El Paso Pipeline Partners a 90-day option to purchase up to an additional 4 percent interest in SNG at a price of approximately $25 million per percent interest purchased.
"We are pleased to announce the partnership's fourth acquisition from El Paso Corporation, which further consolidates our growing asset base," said Jim Yardley, president and chief executive officer for the general partner of El Paso Pipeline Partners. "The acquisition, which is immediately accretive to distributable cash flow, increases our interest in the Southeast's premier natural gas transmission franchise. SNG's strategically located assets are supported by consistent, strong cash flows and continued organic growth opportunities."
El Paso Pipeline Partners expects to finance the transaction in a manner consistent with its current and target capital structure, which may include debt incurred under the partnership's revolving credit facility, the issuance of public securities and the issuance of a promissory note to El Paso Corporation. The transaction is expected to close by the end of June 2010.
Management intends to recommend to the Board of Directors of the general partner an increase in the quarterly cash distribution to $0.40 per unit, or $1.60 per unit on an annualized basis, beginning with the second quarter 2010 distribution, which will be declared and paid in the third quarter 2010. This represents an increase of 5 percent from the first quarter 2010 distribution of $0.38 per unit and an increase of 21 percent above the partnership's second quarter 2009 distribution of $0.33 per unit.
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