The Early Days
Southern Union Company , a subsidiary of Energy Transfer Equity, L.P. (NYSE: ETE) traces its roots to the formation of Southern Union Gas Company of Texas - a utility holding company incorporated under Delaware law in 1929.

Despite that year’s stock market debacle and the Great Depression that followed, the infant company grew remarkably fast in 1929 and 1930. And as the Company grew, so too did its diversity. By the end of 1931, Southern Union had become a holding company with seventeen subsidiaries.

After slowly building its business during the 1930s, SUG changed as World War II caused many employees to go to war, and women and older men to take over the younger men’s jobs. In addition, the natural gas industry’s main priority changed with the war, as it was relied upon to furnish gas service to military projects and plants producing vital war materials.
 

Beyond Texas
Post World War II was a time of major transition and changes in direction, which helped the Company arrive at corporate maturity. In 1945, SUG entered an exciting era – seeing its territories rapidly grow and develop. That year the Company also formally entered the exploration and drilling business. By 1951, the exploration function had grown to sizeable proportions, creating a new organization – Southern Union Production Company. Around the same time, SUG expanded service into Arizona markets.

The Company closed out the 1950s by reporting new highs in customers served, gas volumes delivered, revenues and total assets. With 2,200 employees, SUG was serving seventy-one communities in Texas, New Mexico, Arizona and Colorado.
 

Establishing Our Identity
Although one event after another turned the 1960s into one of the most traumatic decades in American history, through several large mergers, by 1970, SUG had grown into a major corporation. The Company was active in a variety of endeavors and marked an important milestone in its growth and progress by listing its common stock on the New York Stock Exchange.

In 1976, the Company was involved heavily in natural gas distribution, oil and gas exploration and production, gas processing, crude oil refining, marketing of refined products and other operations – principally the marketing of solar energy equipment, the sale of gas appliances and real estate investments. With the rapid evolution of the Company's core business, 1976 brought about a major corporate reorganization. At that time, the official corporate name was changed from Southern Union Gas Company to Southern Union Company and Southern Union Gas became a division of the parent company.

Reassessing the Strategy
In the early 1980s, the Company was executing a strategy of continued diversification. Consequently, by the later part of the decade, that strategy had negatively affected earnings in a dramatic way. In response, SUG sold its oil and gas production, crude oil refining, natural gas processing, real estate and savings and loans businesses. By the late 1980s, the Company operated almost exclusively in the natural gas distribution business in Texas, Arizona and Oklahoma. At that point, talk of deregulating the natural gas industry became more widespread and serious. Unfortunately, throughout the decade, earnings per share continued to drop from $3.70 in 1980 to $.69 in 1990; further, the Company’s stock price plummeted from over $34.00 per share to less than $2.00 per share – all during one of the market’s largest booms.

Getting Back on Track
In 1990, Metro Mobile, Inc. purchased SUG. Founded by current Chairman and Chief Executive Officer George L. Lindemann, Metro Mobile was one of the nation’s premier mobile phone companies with concentrated coverage in the Northeast and Southwest United States (the company later sold to Bell Atlantic Corporation). The next year, Southern Union divested its Arizona operations.

A 10-year corporate strategy, implemented in 1992, included efforts aimed to grow the Company, transform the culture and improve operating efficiencies. To do this, SUG acquired and assimilated complimentary businesses, stabilized earnings through rate designs, expanded its customer base, cross-trained its workforce, promoted and prepared for deregulation, controlled expenses, improved productivity and service quality, and ranked among the lowest cost energy providers.
 

Rebuilding the Core
In 1994, SUG acquired 450,000 natural gas retail customers through its acquisition of Missouri Gas Energy and an additional 75,000 in the Rio Grande Valley, in Texas. The Company also established new businesses in propane, gas marketing, training and international distribution. From 1991 to 1996, earnings per share and the Company’s stock price more than tripled as the new acquisitions were assimilated.

Recognizing the need for weather diversity in its service area, in 1999 and 2000, SUG completed acquisitions of four Northeast natural gas utilities in Pennsylvania (Pennsylvania Enterprises, Inc. – which became PG Energy), Rhode Island and Massachusetts (Providence Energy Corporation, Valley Resources, Inc., and Fall River Gas Company – collectively New England Gas Company). These acquisitions increased the Company’s customer base to more than 1.5 million.
 

Sharpening Our Focus
After these large acquisitions, the Company was again diversified into a number of different energy-related sectors and other investments. In July 2001, SUG announced a corporate reorganization and restructuring initiative in addition to unveiling its Cash Flow Improvement Plan. The Plan aimed to generate at least $50 million in pre-tax cash flow from operations by the end of Fiscal Year 2002. Through the Plan, SUG refocused its operating divisions on meeting their allowable rates of return and reducing operating costs without ever sacrificing reliability, service quality and safety. In addition, the Company divested all non-core assets – using the proceeds to reduce debt by more than $60 million. A full quarter ahead of schedule, SUG surpassed all of the goals set forth through its Cash Flow Improvement Plan. The effects of the Plan continue to positively impact Southern Union’s operations today.

Defining Moments
The first several years of the millennium packed a hard punch for Americans and the economy. The after-effects of the California energy crisis, the September 11 attacks, the fall of several corporate giants, and perpetual unrest in the Middle East, had a particularly negative impact on the energy industry and the stock market as a whole.

As a result, many faltering companies required cash to rescue their operations from bankruptcy. In the energy sector, countless companies were forced to place quality assets on the market at extremely attractive prices. Some of those assets included interstate natural gas pipelines – and that is where SUG saw an opportunity to once again transform its business to further enhance shareholder value. In October 2002, the Company made a monumental decision to sell its Southern Union Gas operating division and other related assets for $420 million in cash and vowed to re-deploy the proceeds in interstate pipeline investments.
 

A Company Transformed
In December 2002, Southern Union changed the face of the company forever by announcing plans to acquire CMS Energy's Panhandle Companies for approximately $1.8 billion. Upon the close of that acquisition in June 2003, SUG extended its reach in the regulated natural gas business by acquiring more than 10,000 miles of interstate natural gas pipelines and the nation's largest LNG import facility.

In November 2004, CCE Holdings, LLC, a joint venture of Southern Union and GE Commercial Finance Energy Financial Services, acquired CrossCountry Energy from Enron Corp. for $2.45 billion, including the assumption certain consolidated debt. The acquired assets included Transwestern Pipeline Company and a 50 percent interest in Citrus Corp., which owns Florida Gas Transmission Company. With the addition of these interstate pipelines, SUG grew its natural gas transmission business to also reach markets in the West and Southeast.

On March 1, 2006, the company closed its acquisition of Sid Richardson Energy Services Company, a natural gas gathering and processing company, for $1.6 billion. Headquartered in Fort Worth, Texas, Sid Richardson Energy Services added approximately 4,600 miles of natural gas and natural gas liquids pipelines in the Permian Basin to Southern Union’s holdings, along with four active cryogenic plants and six active natural gas treating plants.

To help finance the Sid Richardson acquisition, Southern Union announced in January 2006 that it would sell its PG Energy distribution division in Pennsylvania to UGI Corporation for $580 million. In February 2006, the company announced the sale of the Rhode Island assets of its New England Gas Company for $575 million, less assumed debt of $77 million to National Grid USA. Both sales closed the end of August 2006.

Southern Union also transferred its ownership position in Transwestern Pipeline to Energy Transfer Partners on Dec. 1 and increased its ownership interest in Florida Gas Transmission to focus on the growing Florida market.

Today, SUG is one of the largest pipeline operators in the United States, with more than 20,000 miles of gathering and transportation pipelines, 7.4 Bcf/d of transport capacity and 87 Bcf of storage. The company employs more than 2,500 people with operations in 18 states and is one of the nation’s leaders in the natural gas transportation and services industry.