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AIG sells US pipeline in $829m deal

American International Group’s AIG Highstar Capital has agreed to sell Southern Star Central, the largest natural gas pipeline in the central US, to GE’s Energy Financial Services and Caisse de depot et placement du Quebec.

New York- and Houston-based AIG Highstar Capital, the private equity infrastructure fund sponsored by American International Group, has agreed to sell the Southern Star Central natural gas pipeline system to global energy investor GE Commercial Finance Energy Financial Services and Canadian institutional giant Caisse de depot et placement du Quebec in a transaction worth $829 million (€687 million).

Under the terms of the deal, $362 million of the purchase price will be in cash, plus the assumption of $467 million in debt and preferred stock. The deal is expected to close within the third quarter of this year.

Southern Star is the largest natural gas pipeline system in the central US. It is a regulated company that 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.

AIG Highstar Capital acquired Southern Star in 2002 from The Williams Companies, and GE’s Energy Financial Services acquired 2 percent of the equity of Southern Star in 2003. Upon the closing of the latest transaction, GE’s Energy Financial Services will hold a 60 percent interest in Southern Star. Caisse de depot et placement du Quebec will hold 40 percent. The acquisition of Southern Star nearly doubles GE’s Energy Financial Services’, according to a statement.

Southern Star’s management will continue to operate and maintain the pipeline from its Owensboro, Kentucky, headquarters.

AIG Highstar Capital was advised by Lehman Brothers in the sale of its interests in Southern Star.

Currently, AIG’s stable of Highstar Funds manage more than $1.1 billion of capital and have made investments and investment commitments in gas transmission and storage, power generation and water and waste water businesses.

GE Commercial Finance Energy Financial Services, based in Stamford, Connecticut, invests about $3 billion annually in the world’s most capital-intensive industry, energy, and has more than $10 billion total in assets.

The Caisse de depot et placement du Quebec held C$102.4 billion of net assets at the end of last year, with its private equity portfolio accounting for C$10.2 billion of those assets.