AIG Highstar to sell gas pipeline to GE unit for $362 million

Monday, July 11th 2005, 11:17 am

By: News On 6

NEW YORK (AP) _ AIG Highstar Capital LP, a private equity fund sponsored by insurance firm American International Group Inc., said Monday it agreed to sell the Southern Star Central gas pipeline system for $362 million to General Electric Co. and Canada's largest institutional investor.

The transaction, which also includes $467 million in debt and preferred stock, is expected to close in the third quarter of this year, subject to customary closing conditions and regulatory approvals.

Southern Star owns an interstate natural-gas pipeline spanning more than 6,000 miles in Kansas, Oklahoma, Missouri, Wyoming, Nebraska, Colorado and Texas.

In addition to the pipeline, the system includes 39 compressor stations and eight gas storage fields. Southern Star's management will continue to operate and maintain the pipeline from its Owensboro, Ky., headquarters. Customers include local gas distribution companies in Kansas City, St. Louis and Springfield in Missouri, and Kansas City and Wichita in Kansas.

New York-based AIG Highstar Capital acquired Southern Star in 2002 from Williams Cos., and GE Commercial Finances Energy Financial Services acquired 2 percent of Southern Star equity in 2003. After the deal closes, GE's Energy Financial Services will hold a 60 percent stake in Southern Star. The Canadian investment manager, Caisse de depot et placement du Quebec, will hold 40 percent.

GE's Energy Financial Services unit, based in Stamford, Conn., invests about $3 billion annually in energy. General Electric said the purchase of Southern Star doubles its pipeline assets.

This is the second time General Electric Co.'s Energy Financial Services unit has invested in a pipeline with Montreal-based Caisse. Last November, GE's Energy Financial Services unit acquired 50 percent of CrossCountry Energy, a 7,400-mile gas pipeline network spanning most of the region from Florida to California.