UPDATE 2-Laclede to double customers in $1 bln deal with Energy Transfer

Mon Dec 17, 2012 12:22pm EST

* Over 91 percent of earnings from regulated business - Laclede

* Acquisition to be neutral to EPS in year after close - Laclede

By Swetha Gopinath

Dec 17 (Reuters) - Natural gas distributor Laclede Group Inc is buying two utilities from Energy Transfer Equity LP for $1 billion, doubling its customer numbers and boosting its exposure to more stable state-regulated income.

More than 91 percent of Laclede's earnings will come from rate-regulated business after the acquisition of Missouri Gas Energy and New England Gas Co, owned by Energy Transfer's affiliate, Southern Union Co.

About 68 percent of Laclede's operating revenue of $1.12 billion came from its regulated gas distribution business in the year ended Sept. 30.

"With lower ... prices, more and more customers are interested in using natural gas," Chief Executive Suzanne Sitherwood told Reuters. "The other emerging market that is taking place is with natural gas vehicles."

Gas prices have fallen sharply from their peak of more than $13 per million metric British thermal unit (mmBtu) to about $3 now due to vast supplies from shale fields in North America.

This has prompted increased use of gas for heating and power generation. Westport Innovations Inc, General Motors Co , Caterpillar Inc and Ford Motor Co are some of the companies developing technologies to drive the use of the fuel in vehicles.

Laclede too has been working on fueling natural gas vehicles and has received a lot of interest for possible partnerships, Sitherwood said. She did not name the interested parties.

GOOD PRICE FOR ETE

Missouri Gas and New England Gas, which had combined revenue of about $517 million for the year ended Sept. 30, serve more than 500,000 customers in western Missouri and about 50,000 in Massachusetts.

The acquisition, which includes debt of about $20 million, will take Laclede's customer base to 1.2 million, the company said in a statement.

Laclede expects the acquisition to be neutral to its earnings per share in the first full year after close, likely in the third quarter of 2013.

Energy Transfer Partners LP, a unit of Energy Transfer Equity and a party to the deal, said the transaction was part of the company's efforts to divest non-core assets.

The gas utilities passed into Energy Transfer's hands when it bought pipeline operator Southern Union Co last year.

"For the Energy Transfer family, this (deal) compares favorably to our previously modeled $710 million sale estimate," analysts at Robert W. Baird wrote in a note to clients.

St Louis, Missouri-based Laclede said Wells Fargo Bank will provide a $1 billion bridge facility for the purchase.

Laclede shares were down about 2 percent at $39.12 in afternoon trading on Monday on the New York Stock Exchange. Shares of Energy Transfer Equity and Energy Transfer Partners were slightly up.

Wells Fargo Securities LLC advises Laclede, while Credit Suisse Securities LLC is advising Energy Transfer and Southern Union. Moelis & Co gave the fairness opinion to Laclede.

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