ex99_1.htm

HOUSTON, February 26, 2009 – Southern Union Company (NYSE: SUG) today reported net earnings available for common stockholders for the year ended December 31, 2008 of $279.4 million ($2.26 per share) compared with $211.3 million ($1.75 per share) in the prior year. Adjusted net earnings available for common stockholders for the year were $223.4 million ($1.81 per share) compared with adjusted net earnings of $205.6 million ($1.70 per share) in the prior year. Adjusted net earnings for 2008 exclude a non-cash after-tax mark-to-market unrealized gain on open economic hedges of 2009 processing spreads, an after-tax charge related to the company’s repurchase of its preferred stock during the year and a change in tax benefit associated with the dividends received deduction for anticipated dividends from the company's Citrus investment. Adjusted net earnings for 2007 exclude an after-tax gain of $10.5 million related to the settlement of litigation. A reconciliation of net earnings to adjusted net earnings for the year is set forth in the following table.

	Year ended December 31,
($000s, except per share amounts)	2008			2007
Net earnings	$	295,151		$	228,711
Preferred stock dividends	$	(12,212	)	$	(17,365	)
Loss on extinguishment of preferred stock	$	(3,527	)	$	-
Net earnings available for common stockholders	$	279,412		$	211,346
After-tax adjustment for mark-to-market gain	$	(37,410	)	$	-
After-tax adjustment for repurchase of preferred stock	$	3,527		$	-
Tax benefit associated with dividends received deduction	$	(22,100	)	$	-
After-tax adjustment for settlment of litigation and related liability	$	-		$	(10,518	)
After-tax adjustment for the write-down in carrying value of office	$	-		$	4,806
Adjusted net earnings available for common stockholders	$	223,429		$	205,634
Reported net earnings per share available for common stockholders	$	2.26		$	1.75
Adjusted net earnings per share available for common stockholders	$	1.81		$	1.70

The company estimates that Hurricanes Gustav and Ike negatively impacted the year by approximately $17.5 million ($.14 per share) on an after-tax basis. The negative impact during the year was primarily a result of reduced availability in the gathering and processing segment of third-party fractionation facilities damaged by Hurricane Ike, expenses related to damages to the company’s offshore facilities and reduced transportation revenue as a result of reduced volumes flowing after Hurricane Ike.

For the three-month period ended December 31, 2008, the company reported net earnings available for common stockholders of $120.9 million ($.97 per share) compared with $49.4 million ($.41 per share) for the prior year. Adjusted net earnings available for common stockholders for the current quarter were $59.3 million ($.47 per share). Adjusted net earnings exclude a non-cash after-tax mark-to-market unrealized gain on open economic hedges of 2009 processing spreads, an after-tax gain related to the company’s repurchase of its preferred stock and a change in tax benefit associated with the dividends received deduction for anticipated dividends from the company's Citrus investment. A reconciliation of net earnings to adjusted net earnings for the three-month period is set forth in the following table.

	Three months ended December 31,
($000s, except per share amounts)	2008			2007
Net earnings	$	122,557		$	53,732
Preferred stock dividends	$	(2,171	)	$	(4,341	)
Gain on extinguishment of preferred stock	$	504		$	-
Net earnings available to common stockholders	$	120,890		$	49,391
After-tax adjustment for mark-to-market gain	$	(38,960	)	$	-
After-tax adjustment for repurchase of preferred stock	$	(504	)	$	-
Tax benefit associated with dividends received deduction	$	(22,100	)	$	-
Adjusted net earnings available for common stockholders	$	59,326		$	49,391
Reported net earnings per share available for common stockholders	$	0.97		$	0.41
Adjusted net earnings per share available for common stockholders	$	0.47		$	0.41

For the year ended December 31, 2008, net operating revenue, calculated as revenue less cost of gas and other energy and revenue related taxes, increased $156.8 million or 14.3% to $1,251.2 million from $1,094.4 million in the prior year. Adjusted net operating revenue, which excludes the unrealized losses on open economic hedges, was $1,191.5.0 million during the year. For the three months ended December 31, 2008, net operating revenue was $369.0 million compared with $296.1 million in the prior year. Adjusted net operating revenue for the current quarter was $306.7 million. A reconciliation of operating revenue to net operating revenue and adjusted net operating revenue for the year and quarter are available at the end of this press release.

The company uses earnings before interest and taxes (“EBIT”) as its primary measure of evaluating financial performance. EBIT is a non-GAAP measure and should be used in conjunction with net earnings and other performance measures such as operating income or net cash flows provided by operating activities. For the year ended December 31, 2008, Southern Union reported adjusted EBIT of $547.6 million compared with adjusted EBIT of $518.9 million in the prior period, representing an increase of 5.5%. The increase was primarily due to improvements at the company’s transportation and storage and gathering and processing segments. For the three months ended December 31, 2008, Southern Union reported adjusted EBIT of $142.6 million compared with EBIT of $129.4 million in the prior period, representing an increase of 10%. The quarterly increase was primarily due to improvements at the company’s distribution and corporate and other segments. A reconciliation of EBIT to adjusted EBIT and EBIT to net earnings for the year and quarter are available at the end of this press release.

Commenting on the year, George L. Lindemann, chairman and CEO, said, “In light of two significant hurricanes and a major degradation of the economy, commodity and credit markets in the fourth quarter, we are very pleased to have reported solid adjusted earnings of $1.81 per share for 2008. We are equally pleased to announce 2009 adjusted earnings guidance in the range of $1.75 to $1.90 per share.”

President and COO Eric D. Herschmann added, “The strong cash flows and earnings reported by the company in 2008 in the midst of the recent economic downturn reflect the stability of our low-risk business profile and regulated business segments. The completion of our Trunkline LNG Infrastructure Enhancement Project this year will further add to our stable cash flow and earnings base in 2009 and beyond.”

Southern Union’s transportation and storage segment posted EBIT of $404.8 million, compared with adjusted EBIT of $392.4 million in the prior year. The $12.4 million increase was primarily attributable to a $21.4 million increase in EBIT at Panhandle Energy, which includes Panhandle Eastern Pipeline Company and its subsidiaries, partially offset by an $8.9 million decrease in equity earnings from its 50% investment in Citrus Corp. Panhandle Energy saw higher operating revenues of $63.2 million, partially offset by higher operating expenses of $21.6 million and higher depreciation and amortization expense of $18.2 million. The increase in operating revenues was largely due to a $49.1 million increase in reservation revenue, primarily a result of the Trunkline Field Zone Expansion project which was fully placed in service by February 2008, higher parking revenue of $8.2 million and higher storage revenue of $6.7 million. The operating expense increase includes $13.5 million related to damages to the company’s facilities as a result of the hurricanes and higher contract storage costs of approximately $10.2 million. At Citrus Corp., reflective of the company’s 50% interest, operating revenue increased $4.7 million, offset by a $6 million increase in operating expenses, a $2.6 million increase in depreciation and a $4.5 million increase in interest expense.

The gathering and processing segment reported adjusted EBIT of $85.7 million compared with $65.4 million in the prior year. Adjusted EBIT for the year excludes a $59.7 million mark-to-market unrealized gain on open economic hedges of 2009 processing spreads. Gross margin increased by $33.6 million, excluding the impact of mark-to-market accounting on open commodity derivatives, primarily due to improved higher realized natural gas and natural gas liquids prices. The company estimates that gross margin was negatively impacted by $10.6 million during the year, primarily a result of reduced availability of third-party fractionation facilities damaged by Hurricane Ike. Operating expenses increased by $6.1 million, primarily due to a $3.0 million bad debt reserve for receivables associated with a company that filed for bankruptcy, a $2.3 million increase in chemical and lubricant costs and a $2.1 million increase in utility costs. Equity earnings from the company’s investment in Grey Ranch decreased by $2.3 million due to a 2008 fire that removed the plant from service for approximately five months. The plant returned to service in late October 2008. Depreciation expense increased by $3.2 million during the year due to an increase in property, plant and equipment.

Southern Union expects 2009 net earnings to be in the range of $1.45 to $1.60 per share. Adjusted net earnings are expected to be in the range of $1.75 to $1.90 per share. Adjusted net earnings attribute the impact of previously accrued mark-to-market unrealized gains on economic hedges of 2009 processing spreads to 2009 adjusted net earnings. The company’s 2009 Financial Outlook is available on its website at www.sug.com.

Southern Union will host a live investor call and webcast today at 9:00 a.m. Eastern time to discuss results, recent events and outlook. To access the call, dial 888-713-4216 (international callers dial 617-213-4868) and enter the passcode 36278079. A replay of the call will be available for one week after the event by dialing 888-286-8010 (international callers dial 617-801-6888) and entering passcode 69185508. The webcast may be accessed online through the Investor’s section of the company’s web site at www.sug.com.

Please use the following link to pre-register and view important information about this conference call. Pre-registering is not mandatory but is recommended as it will provide you immediate entry into the call and will facilitate the timely start of the call. Pre-registration takes only a few minutes and you may pre-register at any time, including up to and after the call start time. To pre-register, please click Pre-register (control + click on the link) and enter the registration key PUNPENU3T or enter the following URL www.theconferencingservice.com/prereg/key.process and use the same registration key.

Southern Union Company, headquartered in Houston, is one of the nation’s leading diversified natural gas companies, engaged primarily in the transportation, storage, gathering, processing and distribution of natural gas. The company owns and operates one of the nation’s largest natural gas pipeline systems with approximately 20,000 miles of gathering and transportation pipelines and North America’s largest liquefied natural gas import terminal, along with serving more than half a million natural gas end-user customers in Missouri and Massachusetts. For further information, visit www.sug.com.

This news release includes forward-looking statements. Although Southern Union believes that its expectations are based on reasonable assumptions, it can give no assurance that such assumptions will materialize. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein are enumerated in Southern Union’s Forms 10-K and 10-Q as filed with the Securities and Exchange Commission. The Company assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by the Company, whether as a result of new information, future events, or otherwise.

		Year ended December 31,
		2008			2007
	(In thousands, except per share amounts)

Operating revenues		$	3,070,154		$	2,616,665

Operating expenses:
Cost of gas and other energy			1,774,682			1,483,715
Operating, maintenance and general			473,614			444,408
Depreciation and amortization			199,249			177,999
Revenue-related taxes			44,259			38,584
Taxes, other than on income and revenues			48,371			44,874
Total operating expenses			2,540,175			2,189,580
Operating income			529,979			427,085

Other income (expenses):
Interest expense			(207,408	)		(203,146	)
Earnings from unconsolidated investments			75,030			100,914
Other, net			2,325			(883	)
Total other income (expenses), net			(130,053	)		(103,115	)

Earnings before income taxes			399,926			323,970

Federal and state income tax expense			104,775			95,259

Earnings from continuing operations			295,151			228,711

Discontinued operations:
Loss from discontinued operations before			-			-
income taxes
Federal and state income taxes			-			-
Loss from discontinued operations			-			-

Net earnings			295,151			228,711

Preferred stock dividends			(12,212	)		(17,365	)

Loss on extinguishment of preferred stock			(3,527	)		-

Net earnings available for common stockholders		$	279,412		$	211,346

Net earnings available for common stockholders from
continuing operations per share:
Basic		$	2.26		$	1.76
Diluted		$	2.26		$	1.75

Net earnings available for common stockholders per share:
Basic		$	2.26		$	1.76
Diluted		$	2.26		$	1.75
Dividends declared on common stock per share		$	0.60		$	0.45

Weighted average shares outstanding:
Basic			123,446			119,930
Diluted			123,644			120,674

		Three months ended December 31,
		2008			2007
	(In thousands, except per share amounts)

Operating revenues		$	727,118		$	722,911

Operating expenses:
Cost of gas and other energy			343,511			414,680
Operating, maintenance and general			117,349			125,426
Depreciation and amortization			51,256			45,969
Revenue-related taxes			14,599			12,086
Taxes, other than on income and revenues			11,536			11,639
Total operating expenses			538,251			609,800
Operating income			188,867			113,111

Other income (expenses):
Interest expense			(52,872	)		(49,112	)
Earnings from unconsolidated investments			15,579			18,928
Other, net			498			(2,683	)
Total other income (expenses), net			(36,795	)		(32,867	)

Earnings before income taxes			152,072			80,244

Federal and state income tax expense			29,515			26,512

Net earnings			122,557			53,732

Preferred stock dividends			(2,171	)		(4,341	)

Gain on extinguishment of preferred stock			504			-

Net earnings available for common stockholders		$	120,890		$	49,391

Net earnings available for common stockholders per share:
Basic		$	0.98		$	0.41
Diluted		$	0.97		$	0.41
Dividends declared on common stock per share		$	0.15		$	0.15

Weighted average shares outstanding:
Basic			123,986			120,035
Diluted			124,032			120,770

	December 31,
	2008			2007
	(In thousands of dollars)
Total assets	$	7,997,907		$	7,397,913
Long Term Debt		3,257,434			2,960,326
Short term debt and notes payable		462,082			557,680
Preferred stock		115,000			230,000
Common equity		2,252,952			1,975,806
Total capitalization		6,087,468			5,723,812


	Year ended December 31,
	2008			2007
Cash flow information:	(In thousands of dollars)
Cash flow provided by operating activities	$	486,827		$	470,408
Changes in working capital		(64,992	)		(46,232	)
Net cash flow provided by operating activities
before changes in working capital		551,819			516,640
Net cash flow used in investing activities		(568,952	)		(666,604	)
Net cash flow provided by financing activities		80,753			196,135
Change in cash and cash equivalents	$	(1,372	)	$	(61	)

	Year Ended December 31,
Segment Data	2008			2007
	(In thousands)
Revenues from external customers:
Transportation and Storage	$	721,640		$	658,446
Gathering and Processing		1,521,041			1,221,747
Distribution		821,673			732,109
Total segment operating revenues		3,064,354			2,612,302
Corporate and other		5,800			4,363
	$	3,070,154		$	2,616,665

Depreciation and amortization:
Transportation and Storage	$	103,807		$	85,641
Gathering and Processing		62,716			59,560
Distribution		30,530			30,251
Total segment depreciation and amortization		197,053			175,452
Corporate and other		2,196			2,547
	$	199,249		$	177,999

EBIT:
Transportation and Storage segment	$	404,834		$	407,459
Gathering and Processing segment		145,363			65,368
Distribution segment		61,418			62,195
Corporate and other		(4,281	)		(7,906	)
Total EBIT		607,334			527,116
Interest expense		207,408			203,146
Earnings before income taxes		399,926			323,970
Federal and state income tax expense		104,775			95,259
Earnings from continuing operations		295,151			228,711
Loss from discontinued operations before income taxes		-			-
Federal and state income tax expense		-			-
Net earnings		295,151			228,711
Preferred stock dividends		12,212			17,365
Loss on extinguishment of preferred stock		3,527			-
Net earnings available for common stockholders	$	279,412		$	211,346

The Company evaluates segment performance based on several factors, of which the primary financial measure is earnings before interest and taxes (EBIT). EBIT allows management and investors to more effectively evaluate the performance of all of the Company’s consolidated subsidiaries and unconsolidated investments. The Company defines EBIT as net earnings available for common shareholders, adjusted for: (i) items that do not impact earnings from continuing operations, such as extraordinary items, discontinued operations and the impact of changes in accounting principles; (ii) income taxes; (iii) interest; (iv) dividends on preferred stock; and (v) loss on extinguishment of preferred stock.

	Three months ended December 31,
Segment Data	2008			2007
	(In thousands)
Revenues from external customers:
Transportation and Storage	$	192,856		$	168,747
Gathering and Processing		272,728			334,636
Distribution		260,224			218,245
Total segment operating revenues		725,808			721,628
Corporate and other		1,310			1,283
	$	727,118		$	722,911

Depreciation and amortization:
Transportation and Storage	$	26,922		$	22,007
Gathering and Processing		16,179			15,711
Distribution		7,261			7,605
Total segment depreciation and amortization		50,362			45,323
Corporate and other		534			646
	$	50,896		$	45,969

EBIT:
Transportation and Storage segment	$	112,012		$	106,553
Gathering and Processing segment		77,722			23,862
Distribution segment		24,685			13,033
Corporate and other		(9,475	)		(14,092	)
Total EBIT		204,944			129,356
Interest expense		52,872			49,112
Earnings before income taxes		152,072			80,244
Federal and state income tax expense		29,515			26,512
Earnings from continuing operations		122,557			53,732
Loss from discontinued operations before income taxes		-			-
Federal and state income tax expense		-			-
Net earnings		122,557			53,732
Preferred stock dividends		(2,171	)		(4,341	)
Gain on extinguishment of preferred stock		504			-
Net earnings available for common stockholders	$	120,890		$	49,391

	Year ended December 31,
	2008			2007
	(In thousands of dollars)
Southern Union Company:
Reported EBIT	$	607,334		$	527,116
Adjustments:
Citrus litigation settlement		-			(7,500	)
Recorded liability settlement		-			(7,600	)
Write-down in carrying value of Scranton facility		-			6,900
Transwestern Pipeline ownership exchange gain		-			-
Non-recurring transaction related bonuses		-			-
Mark-to-market unrealized hedging (gain) loss		(59,706	)		-
Adjusted EBIT	$	547,628		$	518,916

Transportation & storage segment:
Reported EBIT	$	404,834		$	407,459
Adjustments:
Citrus litigation settlement		-			(7,500	)
Recorded liability settlement		-			(7,600	)
Transwestern Pipeline ownership exchange gain		-			-
Adjusted EBIT	$	404,834		$	392,359

Gathering & processing segment:
Reported EBIT	$	145,363		$	65,368
Adjustments:
Mark-to-market unrealized hedging (gain) loss		(59,706	)		-
Adjusted EBIT	$	85,657		$	65,368

	Three months ended December 31,
	2008			2007
	(In thousands of dollars)
Southern Union Company:
Reported EBIT	$	204,944		$	129,356
Adjustments:
Mark-to-market unrealized hedging (gain) loss		(62,304	)		-
Adjusted EBIT	$	142,640		$	129,356

Gathering & processing segment:
Reported EBIT	$	77,722		$	23,862
Adjustments:
Mark-to-market unrealized hedging (gain) loss		(62,304	)		-
Adjusted EBIT	$	15,418		$	23,862

	Year ended December 31,
	2008			2007
	(In thousands of dollars)
Operating revenues	$	3,070,154		$	2,616,665
Cost of gas and other energy		(1,774,682	)		(1,483,715	)
Revenue-related taxes		(44,259	)		(38,584	)
Net operating revenues		1,251,213			1,094,366
Adjustments:
Mark to market (gain) loss on open economic hedges		(59,706	)		-
Adjusted net operating revenues	$	1,191,507		$	1,094,366


	Three months ended December 31,
	2008			2007
	(In thousands of dollars)
Operating revenues	$	727,118		$	722,911
Cost of gas and other energy		(343,511	)		(414,680	)
Revenue-related taxes		(14,599	)		(12,086	)
Net operating revenue		369,008			296,145
Adjustments:
Mark to market (gain) loss on open economic hedges		(62,304	)		-
Adjusted net operating revenues	$	306,704		$	296,145