Boston, MA 04/30/2014 (wallstreetpr) – AGL Resources Inc. (NYSE:GAS) is a $6.3 billion natural gas distribution company that operates in seven states. The company announced entering a joint investment agreement for the construction of a pipeline. Therefore, the company plans to invest at least $210 million in the pipeline project that will increase the amount of natural gas transported to northwest Georgia.
The engineering design work for the pipeline project is already underway, and construction could begin in mid-2016 with possible completion in the second quarter of 2017. AGL Resources Inc. (NYSE:GAS) will own 50 percent stake in the project. However, after the project commences operation, the company said it plans to lease its position. As such, it expects to realize annual income of $26 million from the lease of its stake in the pipeline facility.
The decision to lease the stake seems to be a strategy to reduce potential and direct losses resulting from the project. Moreover, leasing the project will help the company to realize incremental revenue without an increase operating expenses from its current business.
Growing local distribution
In increasing natural gas supply to northwest Georgia, AGL Resources Inc. (NYSE:GAS) expects to play into the natural gas demand of the electricity generating companies and the growing the high natural gas distribution demand in the region. Moreover, the company hopes to take advantage of the overwhelming supplies in the Marcellus shale.
Joint venture
AGL Resources Inc. (NYSE:GAS) will collaborate with Williams Partners in the pipeline project. The so-called Dalton Lateral pipeline will extend about 106 miles. The surging natural gas supplies in the northeast region means that market for the commodity must be found in places that the commodity is demanded to avoid revenue impact resulting from weak prices.
In conclusion
AGL Resources Inc. (NYSE:GAS)’s move to balance natural gas supply and demand by investing in a new pipeline confirms the company’s strategic growth plan. The project and many others that the company has lined up to take natural gas from regions where supplying is surging to regions where demand is surging should lead to higher revenue and profits for the company.
