Southern Natural Gas Co. LLC

The stable outlook on SNG reflects S&P Global Ratings' expectation that the pipeline will maintain a strong competitive position supplying natural gas to the Southeast, as well as strong credit measures such as total debt-to-EBITDA below 3.5x in 2019 and 2020. We could consider a negative rating action if SNG recapitalizes the pipeline and increases total debt-to-EBITDA above 4x. We could also consider a negative rating action if contracted capacity declines or if re-contracting occurs at much lower rates. This could happen due to greater competition or changes in regional demand for natural gas. We consider a positive rating action unlikely in the near term. However, we would consider raising the rating if the company's sponsors adopted a significantly more

...The company benefits from strong regional positioning in areas with increasing demand for natural gas.Southern Natural Gas Co. LLC (SNG) is geographically well positioned as it delivers natural gas in expanding markets. Alabama, Georgia, and South Carolina are increasing their gas-fired power generation, and SNG has benefited as the principal natural gas transporter in those states. High degree of fee-based activity results in predictable cash flow. As about 90% of SNG's transportation revenue is derived from fixed reservation charges based on contractual quantities, the company benefits from a high degree of visibility in terms of cash flow. Most counterparties are highly rated utilities.SNG's main shippers are utilities rated in the 'A 'category. The largest customer, Southern Co. (A-/Negative/A-2), represents about 45% of revenues. While this results in some counterparty concentration, it is offset by the shippers' overall high credit quality....

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