US power producer Southern Co said it would buy AGL Resources for about $8 billion in cash to build out its natural gas infrastructure and lower its dependence on power generation.
The combined company will operate 320,000km of electric lines and 130,000km of gas pipelines serving nine million customers, making Southern Co the number two US utility by customer count after Exelon.
AGL Resources’ stock rose as much as 32.4 per cent to a record of $63.37 in midday trading on Monday, making it one of the few to trade higher.
While demand for power weakens with increased energy efficiency, demand for gas distribution is growing as prices remain subdued due to a production glut.
That has prompted many US power producers to boost their natural gas infrastructure.
Through the deal, Southern Co will get access to AGL Resources’ 5 percent stake in the 550-mile (885-km) Atlantic Coast pipeline, which moves gas from the Marcellus shale field in Pennsylvania.
“[The deal] gives Southern the opportunity to deepen its roots across the entire energy platform,” said KeyBanc Capital Markets analyst Paul Ridzon.
– (Reuters)
